S-1

As filed with the Securities and Exchange Commission on October 12, 2006

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

FCSTONE GROUP, INC.

(Exact name of registrant as specified in its charter)

Iowa	6221	42-1091210
(State or other jurisdiction of incorporation)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

2829 Westown Parkway, Suite 200

West Des Moines, Iowa 50266

(515) 223-3788

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Paul G. Anderson

2829 Westown Parkway, Suite 200

West Des Moines, Iowa 50266

(515) 223-3788

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Craig L. Evans, Esq. Stinson Morrison Hecker LLP 1201 Walnut, Suite 2900 Kansas City, Missouri 64106 (816) 842-8600 Edward S. Best, Esq. Joseph P. Collins, Esq. Mayer, Brown, Rowe & Maw LLP 71 South Wacker Drive Chicago, Illinois 60606-4637 (312) 782-0600

Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

CALCULATION OF REGISTRATION FEE

Title of each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)(2)		Amount of Registration Fee
Common Stock, no par value	$	90,000,000	$	9,630

(1) Estimated solely for the purpose of determining the registration fee in accordance with to Rule 457(o) under the Securities Act.

(2) Including shares of common stock which may be purchased by the underwriters to cover over-allotments, if any.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Prospectus Subject to Completion, dated October 12, 2006

Shares of Common Stock

                    , 2006

This is FCStone Group, Inc.’s initial public offering of common stock. We are offering to sell             shares of our common stock. Prior to this offering, there was no public market for our common stock. We estimate that the initial public offering price will be between $             and $             per share. We intend to apply to list our common stock for quotation on the NASDAQ Global Market under the symbol “FCSX.”

See “ Risk Factors” beginning on page 8 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Share	Total
Initial public offering price	$	$
Underwriting discounts and commissions	$	$
Proceeds, before expenses, to us	$	$

The underwriters may also purchase up to an additional             shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments of shares.

The underwriters expect to deliver the shares of common stock offered by this prospectus to purchasers on or about                     , 2006.

BMO Capital Markets

TABLE OF CONTENTS

	Page
Prospectus Summary	1
Risk Factors	8
Forward-Looking Statements	21
Use of Proceeds	22
Dividend Policy	22
Capitalization	23
Selected Historical Consolidated Financial and Other Data	24
Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Business	60
Management	81
Principal Stockholders	89
Certain Relationships	91
Description of Capital Stock	92
Shares Eligible for Future Sale	98
Material U.S. Federal Income Tax Consequences for Non-U.S. Holders	99
Underwriting	102
Legal Matters	105
Experts	105
Where You Can Find More Information	105
Index to Company Financial Statements	F-1

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date, and we have an obligation to provide updates to this prospectus only to the extent that the information contained in this prospectus becomes deficient or misleading after the date on the front cover. This prospectus may only be used where it is legal to offer and sell these securities.

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PROSPECTUS SUMMARY

This summary highlights key information contained elsewhere in this prospectus. It may not contain all of the information that is important to you. You should read the entire prospectus, including “Risk Factors” and our consolidated financial statements and the related notes thereto, before making an investment decision. As used in this prospectus, unless the context otherwise indicates, references to “FCStone,” “our company,” “we,” “our” and “us” refer to FCStone Group, Inc. and its consolidated subsidiaries, including, as a result of the reincorporation described below, New FCStone, Inc., a Delaware corporation. Immediately prior to the sale of the common stock offered by this prospectus, FCStone Group, Inc. will merge into New FCStone, Inc., which will change its name to FCStone Group, Inc. The terms “fiscal year” and “fiscal” refer to the year ended on August 31 of the year referenced, while the terms “calendar year” and “year” refer to the year ended December 31 of the year referenced. This prospectus does not include the financial statements of New FCStone, Inc. because it has only been formed recently for the purpose of effecting the offering and, until the consummation of the reincorporation described above, will hold no material assets and will not engage in any operations.

Our Company

We are an integrated commodity risk management company providing risk management consulting and transaction execution services to commercial commodity intermediaries, end-users and producers. We assist primarily middle market customers in optimizing their profit margins and mitigating their exposure to commodity price risk. In addition to our risk management consulting services, we operate one of the leading independent clearing and execution platforms for exchange-traded futures and options contracts. We serve more than 7,500 customers and in the twelve months ended May 31, 2006, executed 44.3 million contracts in the exchange-traded and over-the-counter (“OTC”) markets. Our net income increased $6.5 million, or 131.9%, from $4.9 million for the nine months ended May 31, 2005, to $11.4 million in the nine months ended May 31, 2006.

We began offering commodity risk management consulting services to grain elevators in 1968. Since that time, our business has evolved to meet the changing needs of our customers. In response to these changing needs, we expanded our risk management services from a focus on agricultural futures and options to a wider array of instruments, including OTC derivatives, and to other kinds of commodities, including energy commodities, forest products and food products. We operated as a member-owned cooperative until 2005, when we converted to a stock corporation to improve our access to capital and to facilitate continued growth in our operations.

We provide our customers with various levels of commodity risk management services, ranging from value-added consulting services delivered through our Integrated Risk Management Program (“IRMP”) to lower-margin clearing and execution services for exchange-traded futures and options. Our consultative focus is demonstrated by the IRMP, which involves providing our customers with commodity risk management consulting services that are designed to help them mitigate their exposure to commodity price risk and maximize the amount and certainty of their operating profits. In performing consulting services, we educate our customers as to the commodity risks that they may encounter and how they can use the derivative markets to mitigate those risks. The IRMP forms the basis of our value-added approach and serves as a competitive advantage in customer acquisition and retention. We offer our customers access to both exchange-traded and OTC derivative markets, integrating the two platforms into a seamless product offering delivered by our approximately 100 commodity risk management consultants.

We also offer clearing and execution services to a broad array of exchange-traded futures and options market participants including commercial accounts, professional traders, managed futures funds, introducing

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brokers and retail customers. We are a futures commission merchant (“FCM”) with clearing-member status at all of the major U.S. commodity futures and options exchanges. As of July 31, 2006, we were the third largest FCM in the U.S., as measured by required customer segregated assets, not affiliated with a major financial institution or commodity intermediary, end-user or producer. Our exchange-traded futures and options transaction volumes have grown from 6.1 million contracts in fiscal 2001 to 44.3 million contracts in the twelve months ended May 31, 2006, a compounded annual growth rate (“CAGR”) of 51.8%. As of May 31, 2006, we had $825.3 million in customer segregated assets.

In addition to our Commodity and Risk Management and Clearing and Execution Services segments discussed above, we also operate in two other related business segments. Our Financial Services segment offers financing services that help our customers finance physical grain inventories and other commodities. We also provide financing in transactions where we share in profits with customers in commodity or commodity-related transactions or projects in exchange for financial support. In the Grain Merchandising segment, we operate through our majority interest in FGDI, LLC. FGDI acts as a grain dealer in the United States and international markets, primarily Asia, Latin America and Canada. The primary role of FGDI is to link merchandisers of grain products through our network of industry contacts, serving as an intermediary to facilitate the purchase and sale of grain.

Our Industry

The commodity risk management industry is noted for both its fragmented nature and its overall breadth, as it serves commodities intermediaries, end-users and producers. The industry can generally be segmented into providers of either one, or both, of two services to customers: risk management consulting and trade execution and clearing services. Risk management consulting is an advisory function by which a company advises its customer on strategies to manage its commodity risk. Trade execution and clearing services are performed by serving as an intermediary between a customer and a commodity exchange or other counterparty.

Commodity Risk Management Consulting. Commodity risk management consultants perform a variety of functions for their customers. A risk management consultant works with a customer to identify its exposure to commodity risk, recognizing the relationship between input and finished products and the price risk that a customer assumes in delivering its products. To provide valuable risk management proposals, the consultant must combine the experience to analyze the historical performance of commodity markets with the insight to discern how future events may differ from the past. Finally, a consultant must provide market research and program updates on a regular basis to facilitate the management of a customer’s commodity risk management program.

Trade Execution and Clearing. Trade execution and clearing services for exchange-traded derivatives are provided by FCMs, while OTC derivatives are provided by FCMs and other market participants. In many cases, FCMs are members of one or more exchanges that solicit or accept orders from customers for the purchase or sale of futures or options contracts and route those orders to the appropriate exchange. FCMs also monitor and manage their customers’ accounts by holding their customers’ assets, including cash deposits and futures positions, facilitating customer trading in contracts listed on exchanges, guaranteeing customers’ trades to the exchange and sometimes extending credit to customers.

Industry Growth. The total international notional value outstanding of exchange-traded and OTC derivative contracts has expanded rapidly in recent years, evidencing the large growth potential of the commodity risk management industry. The notional value outstanding of exchange-traded contracts has grown at a CAGR of 22.5% over the past seven years, according to the Bank for International Settlements, while the OTC market has grown at a CAGR of 19.8% over the same time period.

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Industry Trends. We believe that growth in the commodity risk management and derivative industries is driven by the following factors:

• Increasing acceptance of risk management,

• Increasing commodity prices and price volatility,

• Electronic trading,

• Product innovation,

• Influence of hedge funds and professional traders, and

• Deregulation.

Our Competitive Strengths

We believe our following competitive strengths will enable us to successfully grow our business and increase our profitability:

• Long-Term Relationship-Focused Commodity Risk Management Company. We are a relationship-oriented company focused on commodity risk management consulting services. We believe that our long-standing presence in the local, regional and national commodity markets enables us to penetrate rapidly-evolving commodity markets. We provide a high level of customer service and attention to the commodity risk management needs of our customers in order to build long-term relationships. The ability to work with customers to help them design and implement commodity risk management programs, leading them to more stable and predictable financial performance is a key competitive advantage.

• Skilled Risk Management Consultants. Our risk management consultants are in regular contact with customers as they deliver our services, including the IRMP. This close contact provides our consultants with an appreciation of the needs of our customers and the opportunities in the marketplace. As a result, our risk management consultants identify opportunities and develop new products and strategies, with the assistance of our experienced management team.

• Middle-Market Focus. We focus primarily on middle-market commercial commodity intermediaries, end-users and producers. These companies often have significant commodity risk requiring sophisticated risk management consulting services, but lack the resources or expertise to field an in-house team of risk management professionals. We believe this market segment is underserved by the large financial institutions and commodity firms.

• Integrated Business Model. We operate an integrated business model whereby we develop commodity risk management strategies for our customers and execute them through both the exchange-traded and the OTC markets, providing a seamless mechanism for developing and executing a customer’s commodity risk management program.

• Management Expertise. Our senior management team has an average of 28 years of experience working in commodity management, risk management or commodity trading.

• Leading Position in Renewable Fuels Industry. By leveraging our core competencies of risk management consulting and grain merchandising, we provide risk management services to producers representing approximately 20% of domestic ethanol capacity, as well as other producers in the renewable fuels industry. We also assist producers in acquiring raw materials as well as selling finished products.

• Independent Consulting and Access to Markets. We are an independent commodity risk manager and FCM that is not affiliated with a major financial institution or commodity producer, intermediary or end-user. We are one of only a few independent commodity risk management consulting companies

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with the ability to offer full trade and order execution through every major commodities exchange in the world. Our independence gives us the ability to offer advice and services that are not influenced by our other operations.

Our Growth Strategies

We plan to continue to increase our revenues and profitability by executing the following strategies:

• Further Penetrate New Customer Segments. We believe there are significant opportunities to further penetrate new customer segments to diversify our revenue stream, as commodity market conditions favor increased use of commodity risk management practices. We plan to continue deploying resources, including our team of risk management consultants, into areas where volatile market conditions have increased commodity risk exposure to intermediaries, end-users and producers.

• Expand Risk Management Consulting Services. We believe that new products and services create significant growth opportunities among our existing customer base. Our risk management consultants continually examine the changing needs of our customers to identify such opportunities.

• Expand International Presence. We intend to continue our expansion into international markets where customers tend to be in the early stage of acceptance of commodity risk management consulting services and products. Our consultative approach and the IRMP provide us with a competitive advantage in international markets because many of our potential customers in these markets are not as aware of the extent to which they can mitigate this commodity exposure through the derivatives markets. We anticipate that Brazil and China will be our two strongest international markets in the years to come.

• Develop Human Capital. We intend to increase the number of new risk management consultants that we hire. Our commodity risk management consultants are responsible for developing customer relationships, analyzing the inherent commodity risk of our customers, developing various strategies to mitigate this risk and executing these strategies at the direction of our customers.

• Capitalize on Shift to Electronic Trading. We intend to capitalize on the growth opportunities made available by the shift to electronic trading. We expect this shift to have a positive effect in our clearing business by increasing volume while lowering trading costs, increasing consultant productivity and enhancing the importance of a high level of customer service.

Company Information

FCStone Group, Inc. is an Iowa corporation. Prior to the sale of the common stock offered pursuant to this prospectus, our company will reincorporate as a Delaware corporation. Our principal offices are located at 2829 Westown Parkway, Suite 200, West Des Moines, Iowa 50266, and our telephone number is 515-223-3788. We also have a website located at www.fcstone.com. The information that appears on our website is not part of, and is not incorporated into this prospectus.

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The Offering

Common stock offered by us              shares

Common stock to be outstanding after this offering              shares

Use of proceeds Approximately $             million will be used to redeem, pro rata, a portion of the shares of common stock outstanding held by our shareholders immediately prior to the consummation of the offering. The remaining net proceeds will be used to reduce subordinated and general corporate debt, increase the regulatory capital of our FCM and for general corporate purposes.

Dividend policy Regular dividends may be declared and paid on our common stock at the discretion of our board of directors. Any determination to pay cash dividends will be at the discretion of our board of directors and will depend upon our results of operations and cash flows, our financial position and capital requirements, general business conditions and other factors.

Risk factors See “Risk Factors” beginning on page 8 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

Proposed NASDAQ Global Market symbol FCSX

Unless otherwise indicated, all of the information in this prospectus:

• gives effect to our Delaware reincorporation,

• excludes 350,000 shares of our common stock reserved for future grants under our Equity Incentive Plan,

• assumes no exercise of the underwriters’ option to purchase up to an additional              shares from us,

• assumes an initial offering price of $             per share, the midpoint of the offering range set forth on the cover of this prospectus,

• assumes a redemption of              shares of common stock at the initial offering price, less underwriting discounts and commissions, and

• assumes a             -for-1 stock split, which will be effectuated as a stock dividend prior to the consummation of this offering.

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Summary Financial Data

The table shown below presents our summary financial data at the date and for the periods indicated. The summary financial data as of August 31, 2004 and August 31, 2005 and for each of the years in the three-year period ended August 31, 2005 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary financial data as of August 31, 2001, 2002 and 2003 and for each of the years in the two-year period ended August 31, 2003 have been derived from our audited consolidated financial statements that are not included in this prospectus. The summary financial data as of and for the nine-month periods ended May 31, 2005 and 2006 have been derived from our unaudited consolidated financial statements which are included elsewhere in this prospectus and include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the data for those periods. Operating results for the nine months ended May 31, 2006 are not necessarily indicative of the results that may be expected for the entire year ended August 31, 2006. Historical per share data has been omitted for each fiscal year prior to the fiscal year 2005 because under our previous cooperative structure in place during those periods, earnings of the cooperative were distributed as patronage dividends to member shareholders based on the level of business conducted with the cooperative as opposed to a common stockholder’s proportionate share of underlying equity in the cooperative.

You should read the data set forth below in conjunction with our consolidated financial statements and the related notes thereto, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Capitalization,” “Selected Consolidated Financial and Other Data” and other financial information included elsewhere in this prospectus.

	Year Ended August 31,											Nine Months Ended May 31,
	2001		2002		2003		2004		2005			2005		2006
	(dollars in thousands, except per share amounts)											(unaudited)
Statement of Operations Data:
Revenues:
Commissions and clearing fees	$	33,473	$	41,025	$	48,947	$	67,594	$	76,674		$	54,840	$	74,635
Service, consulting and brokerage fees		8,734		10,834		10,566		12,008		18,913			13,244		24,598
Interest		6,011		3,634		4,610		3,982		8,177			5,269		15,277
Other		2,503		2,088		4,299		4,521		7,463			4,720		2,480
Sales of commodities		638,870		838,361		1,164,334		1,536,209		1,290,620			1,028,876		860,678
Total revenues		689,591		895,942		1,232,756		1,624,314		1,401,847			1,106,949		977,668
Costs and expenses:
Cost of commodities sold		630,492		826,544		1,150,608		1,519,221		1,275,094			1,015,435		848,480
Employee compensation and broker commissions		20,020		23,952		25,955		30,160		32,578			24,000		30,663
Pit brokerage and clearing fees		7,903		11,557		16,382		26,713		33,141			23,900		33,626
Introducing broker commissions		6,441		7,802		8,551		10,704		14,459			9,890		15,575
Employee benefits and payroll taxes		3,510		4,707		5,971		7,136		8,044			5,990		7,292
Interest		1,217		1,297		3,040		4,418		3,946			2,895		4,335
Depreciation and amortization		769		892		837		861		1,551			1,147		1,214
Bad debt expense		—		310		76		716		4,077			1,163		1,709
Other expenses		11,439		13,613		15,270		15,365		18,926			14,183		16,824
Total costs and expenses		681,791		890,674		1,226,690		1,615,294		1,391,816			1,098,603		959,718
Income before income tax expense and minority interest		7,800		5,268		6,066		9,020		10,031			8,346		17,950
Minority interest		242		600		561		576		(499	)		494		(370	)
Income after minority interest and before income taxes		7,558		4,668		5,505		8,444		10,530			7,852		18,320
Income tax expense		1,590		1,280		1,200		2,030		3,950			2,950		6,950
Net income	$	5,968	$	3,388	$	4,305	$	6,414	$	6,580		$	4,902	$	11,370
Basic and diluted shares outstanding(1)										4,357			4,315		4,829
Basic and diluted earnings per share(1)									$	1.51		$	1.14	$	2.35

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	August 31,															May 31,
	2001			2002			2003			2004			2005			2005			2006
	(dollars in thousands)															(unaudited)
Statement of Financial Condition Data:
Total assets	$	271,911		$	399,526		$	504,733		$	603,827		$	805,522		$	612,554		$	1,163,562
Notes payable and subordinated debt		25,179			66,013			76,548			47,281			42,411			56,473			90,403
Obligations under capital leases		—			—			5,363			4,675			4,125			4,263			3,713
Minority interest		3,243			3,758			4,109			5,488			4,755			5,749			3,463
Redeemable common stock held by employee stock ownership plan (ESOP)(2)		—			—			—			—			4,487			—			6,079
Capital stock and equity	$	35,068		$	35,172		$	35,827		$	39,829		$	45,185		$	45,458		$	52,288
	Year Ended August 31,															Nine Months Ended May 31,
	2001			2002			2003			2004			2005			2005			2006
	(dollars and volumes in thousands)															(unaudited)
Segment and Other Data:
Income (loss) before minority interest and income tax expense:
Commodity and Risk Management Services	$	8,337		$	5,591		$	6,676		$	7,907		$	11,160		$	6,067		$	15,731
Clearing and Execution Services		246			863			947			3,359			5,152			3,787			8,483
Financial Services		—			—			109			(447	)		556			552			(102	)
Grain Merchandising		1,940			2,002			1,869			2,230			(2,037	)		1,253			(911	)
Corporate		(2,723	)		(3,188	)		(3,535	)		(4,029	)		(4,800	)		(3,313	)		(5,251	)
	$	7,800		$	5,268		$	6,066		$	9,020		$	10,031		$	8,346		$	17,950
Revenues, net of cost of commodities sold(3)	$	59,099		$	69,398		$	82,148		$	105,093		$	126,753		$	91,514		$	129,188
EBITDA(3)	$	9,544		$	6,857		$	9,382		$	13,723		$	16,027		$	11,894		$	23,869
Return on equity		17.7	%		9.5	%		11.7	%		16.5	%		15.4	%		15.5	%		31.2	%
Exchange contract trading volume		6,137			10,648			16,268			29,911			36,240			26,566			34,500
Customer segregated assets, end of period	$	190,861		$	262,482		$	246,215		$	389,953		$	594,733		$	402,260		$	825,344

(1) The calculation of the basic and diluted shares outstanding for the year ended August 31, 2005 and the nine months ended May 31, 2005 assumes the shares issued as a result of our March 1, 2005 restructuring had been issued and outstanding for the full periods. Historical earnings per-share data has been omitted for fiscal years prior to 2005 because earnings were distributed as patronage dividends to members based on the level of business conducted.

(2) In the event a terminated plan participant desires to sell his or her shares of common stock, we may be required to purchase the shares from the participant at their appraised value. Redeemable common stock held by the ESOP represents our maximum obligation to purchase common stock distributed to a terminated plan participant based upon the most recent appraised value as of the applicable date. Upon completion of the offering described in this prospectus, our obligation to purchase such shares of common stock will cease in accordance with the terms of the ESOP.

(3) See “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures.”

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RISK FACTORS

You should carefully consider the risks below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our operations. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

Risks Relating to Our Company

Our business depends on commodity market and general economic conditions. We generate significant revenues from commissions and clearing fees we earn from executing and clearing customer orders, fees for providing commodity risk management consulting services and interest income we earn on cash balances in our customers’ accounts. These revenue sources are substantially dependent on customer trading volumes, interest rates and related services and activities. The volume of transactions our customers conduct with us, interest rates and demand for our related services and activities are directly affected by domestic and international commodity market and economic conditions that are beyond our control, including:

• commodity market conditions, such as price levels and volatility,

• concerns about terrorism and war,

• the level and volatility of interest rates,

• inflation,

• availability and cost of funding and capital,

• credit capacity or perceived creditworthiness of the futures industry in the marketplace,

• legislative and regulatory changes, and

• currency values and changes in government monetary policies.

Declines in the volume of trading in the markets in which we operate generally result in lower revenue from our most profitable segments, which would adversely affect our profitability.

Our revenue depends on trading volume which depends in large part on commodity prices and commodity price volatility. Trading volume is driven largely by the degree of volatility—the magnitude and frequency of fluctuations—in prices of commodities. Higher volatility increases the need to hedge contractual price risk and creates opportunities for arbitrage trading. Energy commodities markets historically, and agricultural commodities markets periodically, have experienced significant price volatility. In addition to price volatility, increases in commodity prices lead to increased trading volume. As prices of commodities have risen, especially energy prices, new participants have entered the markets to address their growing risk-management needs or to take advantage of greater trading opportunities. Sustained periods of stability in the prices of commodities or generally lower prices could result in lower trading volumes and, potentially, lower revenues.

Factors that are particularly likely to affect price volatility and price levels of commodities include:

• supply and demand of commodities;

• weather conditions affecting certain commodities;

• national and international economic and political conditions;

• perceived stability of commodities and financial markets;

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• the level and volatility of interest rates and inflation; and

• financial strength of market participants.

Any one or more of these factors may reduce price volatility or price levels in the markets for commodities trading, which in turn could reduce trading activity in those markets. Moreover, any reduction in trading activity could reduce liquidity which in turn could further discourage existing and potential market participants and thus accelerate any decline in the level of trading activity in these markets.

Decreases in short-term interest rates would negatively impact our profitability. The level of prevailing short-term interest rates affects our profitability because a portion of our revenue is derived from interest earned from the investment of funds deposited with us by our customers. Our financial performance generally benefits from rising interest rates. Rising interest rates increase the amount of interest income earned from these customer deposits. If short-term interest rates fall, our revenues derived from interest will decline which would negatively impact our profitability.

Short-term interest rates are highly sensitive to factors that are beyond our control, including general economic conditions and the policies of various governmental and regulatory authorities. In particular, decreases in the federal funds rate by the Board of Governors of the Federal Reserve System usually lead to decreasing interest rates in the U.S., which generally lead to a decrease in short-term interest rates.

Our customers are concentrated in the agricultural sector and related industries and we are therefore particularly subject to government policies and regulations affecting those industries. We do a substantial amount of business with companies in the agricultural sector and related industries. Economic forces, including agricultural commodity, energy and financial markets, as well as government policies and regulations affecting the agricultural sector and related industries could adversely affect our operations and profitability. Agricultural production and trade flows are significantly affected by government policies and regulations. Governmental policies affecting the agricultural industry, such as taxes, tariffs, duties, subsidies and import and export restrictions on agricultural commodities and commodity products, can influence industry profitability, the planting of certain crops versus other uses of agricultural resources, the location and size of crop production, whether unprocessed or processed commodity products are traded and the volume and types of imports and exports.

Many of our customers and much of our expected growth are in the energy and related renewable fuels industries and our revenues could decline as a result of adverse developments in these industries. Many of our current customers and much of our expected growth are in the energy and related renewable fuels industries. Energy prices and energy price volatility are affected by local, regional and global events and conditions that affect supply and demand for the relevant energy-related commodity. Adverse developments in the energy markets could adversely affect the operations and profitability of our customers in these industries, which could adversely affect demand for our commodity risk management services in this area and our revenues. The renewable fuels industry is a developing industry that involves a high degree of risk. Generally, renewable fuel production is profitable as long as energy prices remain at relatively high levels and feed stocks are readily available at acceptable price and volume levels. In addition, government subsidies of the renewable fuel industry and favorable environmental regulations are critical to the industry’s profitability at this time. The renewable fuels industry is currently in a period of rapid expansion, and there can be no assurance that such expansion will continue or that such expansion will not result in reduced prices and profit margins in the industry. We enter into long-term supply contracts with renewable fuel producers, which creates potential credit risk with respect to the obligations of those producers, particularly if the producers become less profitable.

We are exposed to the credit risk of our customers and counterparties and their failure to meet their financial obligations could adversely affect our business. Each segment of our business is subject to credit risk.

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Over-the-counter (“OTC”) derivative transactions are subject to credit risks, which is the risk that a counterparty will fail to perform its obligations when due. Customers and counterparties that owe us money, securities or other assets may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure or other reasons.

As a clearing broker, we act on behalf of our customers for all trades consummated on exchanges. Accordingly, we are responsible for our customers’ obligations with respect to these transactions, which exposes us to significant credit risk. A substantial part of our working capital is at risk if customers default on their obligations to us and their account balances and security deposits are insufficient to meet all of their obligations.

Our grain merchandising business is also subject to credit risk for the failure of counterparties to meet their financial obligations. These counterparties may, in some instances, be in international markets, which may complicate collection efforts.

Our financial service activities, which primarily relate to financial accommodations to customers used to acquire and carry commodities, expose us to substantial credit risks due to possible defaults or nonperformance of our customers.

Although we have procedures for reviewing credit exposures to specific customers and counterparties to address present credit concerns, default risk may arise from events or circumstances that are difficult to detect or foresee including rapid changes in commodity price levels. Some of our risk management methods depend upon the evaluation of information regarding markets, clients or other matters that are publicly available or otherwise accessible by us. That information may not, in all cases, be accurate, complete, up-to-date or properly evaluated. In addition, concerns about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions, which in turn could adversely affect us. We may be materially and adversely affected in the event of a significant default by our customers and counterparties.

We face substantial competition that could negatively impact our revenues and our profitability. The commodity risk management industry and the broader financial services industry are very competitive and we expect competition to continue to intensify in the future. Many of the companies with which we compete are better capitalized than we are and have greater financial, technical, marketing and other resources than we have. Our primary competitors include both large, diversified financial institutions and commodity-oriented businesses, smaller firms that focus on specific products or regional markets and independent futures commission merchants (“FCMs”). As a result, we compete with a large number of smaller firms that focus on personalized service, and a smaller number of larger, better capitalized companies that focus less on personalized service but have significant execution capabilities and market presence.

Some of our competitors offer a wider range of services, have broader name recognition and have larger customer bases than we do. Some of them may be able to respond more quickly to new or evolving opportunities, technologies and customer requirements than we can, and may be able to undertake more extensive marketing activities. If we are not able to compete successfully in the future, our business, financial condition and results of operations would be adversely affected.

We have experienced intense price competition in our clearing and execution business in recent years. Some competitors may offer clearing and execution services to customers at lower prices than we are offering, which may force us to reduce our prices or to lose market share and revenue. In addition, we focus on developing and marketing complex strategies to our clients that are specifically designed to address their commodity risk management or merchandising needs, or the needs of their customers. As the market adopts these strategies, competitors may have the ability to replicate our services. As a result, the need for our services in relation to these strategies could be significantly reduced.

Until recently we operated as a member-owned cooperative and have a limited operating history as a business corporation. Accordingly, our historical and recent financial and business results may not be representative of what they may be in the future. Prior to 2005, we operated as a member-owned cooperative

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operating for the benefit of our members and our business strategy was focused on providing services to our members at a reasonable cost. Since 2005, we have operated our business for the long-term benefit of our stockholders and our business strategy is designed to maximize revenue and profitability. We have a limited operating history as a business corporation on which you can evaluate our management decisions, business strategy and financial results. As a result, our historical financial and business results may not be representative of what they may be in the future. We are subject to risks, uncertainties, expenses and difficulties associated with changing and implementing our business strategy.

Future growth could strain our personnel and infrastructure resources. We anticipate a period of significant growth, which we expect to place a strain on our administrative, financial and operational resources. Our ability to manage growth effectively will require us to improve existing, and implement additional, operational, financial and management controls and reporting systems and procedures. We will also be required to identify, hire and train additional risk management consultants as well as administrative staff. We cannot assure you that we will be able to improve or implement such controls, systems and procedures in an efficient and timely manner or that they will be adequate to support our future operations. Furthermore, we may not be able to identify, hire and train sufficient personnel to accommodate our growth. If we are unable to manage growth effectively, maintain our service or if new personnel are unable to achieve performance levels, our business, operating results, prospects and financial condition could be materially adversely affected.

Our business could be adversely affected if we are unable to retain our existing customers or attract new customers. The success of our business depends, in part, on our ability to maintain and increase our customer base. Customers in our market are sensitive to, among other things, the costs of using our services, the quality of the services we offer, the speed and reliability of order execution and the breadth of our service offerings and the products and markets to which we offer access. We may not be able to continue to offer the pricing, service, speed and reliability of order execution or the service, product and market breadth that customers desire. In addition, once our commodity risk management consulting customers have become better educated with regard to sources of commodity risk and the tools available to facilitate the management of this risk and we have provided them with recommended hedging strategies, they may no longer continue paying monthly fees for these services. Furthermore, our existing customers, including Integrated Risk Management Program (“IRMP”) customers, generally are not obligated to use our services and can switch providers of clearing and execution services or decrease their trading activity conducted through us at any time. As a result, we may fail to retain existing customers or be unable to attract new customers. Our failure to maintain or attract customers could have a material adverse effect on our business, financial condition and operating results.

We rely on relationships with introducing brokers for obtaining some of our customers. The failure to maintain these relationships could adversely affect our business. We have relationships with introducing brokers who assist us in establishing new customer relationships and provide marketing and customer service functions for some of our customers. These introducing brokers receive compensation for introducing customers to us. Many of our relationships with introducing brokers are non-exclusive or may be cancelled on relatively short notice. In addition, our introducing brokers have no obligation to provide new customer relationships or minimum levels of transaction volume. Our failure to maintain these relationships with these introducing brokers or the failure of these introducing brokers to establish and maintain customer relationships would result in a loss of revenues, which could adversely affect our business.

We are dependent on our management team, and the loss of any key member of our team may prevent us from executing our business strategy effectively. Our future success depends, in large part, upon our management team who possess extensive knowledge and management skills with respect to commodity risk management. The unexpected loss of services of any of our executive officers could adversely affect our ability to manage our business effectively or execute our business strategy. Although these officers have employment contracts with us, they are generally not required to remain with us for a specified period of time. In addition, we do not maintain key-man life insurance policies on any of our executive officers.

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Competition for risk management consultants could result in our being unable to attract and retain the highly skilled risk management consultants that we need to support our business or we may be required to incur additional expense to do so. We strive to provide high-quality risk management consulting and execution services that allow us to establish and maintain long-term relationships with our clients. Our ability to continue to provide these services, maintain these relationships and expand our business depends, in large part, upon our risk management consultants. As a result, we must attract and retain highly qualified personnel. Competition for the services of consultants is intense, especially for people with extensive experience in the specialized markets in which we participate or may seek to enter. If we are unable to hire highly qualified people, we may not be able to enter new markets or develop new products. If we lose one or more of our risk management consultants in a particular market in which we participate, our revenues may decrease and we may lose market share in that particular market.

In addition, recruitment and retention of qualified personnel could require us to pay sign-on or guaranteed bonuses or otherwise increase our employee costs. These additional costs could adversely affect our profitability.

We operate in a highly regulated industry and we may face restrictions with respect to the way we conduct certain of our operations. Our businesses, and the commodity brokerage industry generally, are subject to extensive regulation at the federal level. These regulations are designed to protect the interests of the investing public generally rather than our stockholders. Self-regulatory organizations, including the National Futures Association (the “NFA”) and the Chicago Mercantile Exchange (the “CME”) (our designated self-regulatory organization), require compliance with their extensive rules and regulations. The Commodity Futures Trading Commission (the “CFTC”) and other federal agencies extensively regulate the U.S. futures and commodities industry. Our grain merchandising business is also subject to state regulation of grain dealers and federal regulation by the U.S. Department of Agriculture and the Food and Drug Administration.

Some aspects of our business are subject to extensive regulation, including:

• the way we deal with and solicit clients,

• capital requirements,

• financial and reporting practices,

• required record keeping and record retention procedures,

• the licensing of our operating subsidiaries and our employees,

• the conduct of directors, officers, employees and affiliates,

• systems and control requirements,

• restrictions on marketing, and

• client identification and anti-money laundering requirements.

Failure to comply with any of the laws, rules or regulations of any federal, state or self-regulatory authority could result in a fine, injunction, suspension or expulsion from the industry, which could materially and adversely impact us.

We and our employees, including our officers, may be subject to censure, fines, suspensions or other sanctions which may have a material and adverse impact on our business. Even if any sanction does not materially affect our financial position or results of operations, our reputation could be harmed.

The government agencies that regulate us have broad powers to investigate and enforce compliance and punish noncompliance with their rules, regulations and industry standards of practice. We or our directors, officers and employees may not comply with the rules and regulations of, and may be subject to claims or actions by, these agencies. In addition, because our industry is heavily regulated, regulatory approval may be required

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prior to expansion of business activities. We may not be able to obtain the necessary regulatory approvals for any desired expansion. Even if approvals are obtained, they may impose restrictions on our business or we may not be able to continue to comply with the terms of the approvals or applicable regulations. The implementation of unfavorable regulations or unfavorable interpretations of existing regulations by courts or regulatory bodies could require us to incur significant compliance costs or cause the development or continuation of business activities in affected markets to become impractical.

Changes in legislation or regulations may affect our ability to conduct our business or reduce our profitability. The legislative and regulatory environment in which we operate has undergone significant change in the past and may undergo significant change again in the future. The federal government, the CFTC, the Securities and Exchange Commission (the “SEC”), the CME, the NFA and other U.S. or foreign governmental authorities continuously review legislative and regulatory initiatives and may adopt new or revised laws and regulations. These legislative and regulatory initiatives may affect the way in which we conduct our business and may make our business less profitable. Changes in the interpretation or enforcement of existing laws and regulations by those entities may also adversely affect our business.

We are subject to a risk of legal proceedings, which may result in significant losses to us that we cannot recover. Many aspects of our business subject us to substantial risk of potential liability to customers and to regulatory enforcement proceedings by federal and other regulators. These risks include, among others, potential civil litigation triggered by regulatory investigations, potential liability from disputes over terms of a trade, the claim that a system failure or delay caused monetary losses to a customer, that we entered into an unauthorized transaction or that we provided materially false or misleading statements in connection with a transaction. Dissatisfied clients can make claims against us, including claims for negligence, fraud, unauthorized trading, failure to supervise, breach of fiduciary duty, employee errors, intentional misconduct, unauthorized transactions by associated persons and failures in the processing of transactions. These risks also include potential liability from disputes over the exercise of our rights with respect to customer accounts and collateral. Although our customer agreements generally provide that we may exercise such rights with respect to customer accounts and collateral as we deem reasonably necessary for our protection, our exercise of these rights could lead to claims by customers that we have exercised these rights improperly.

Additionally, employee misconduct could subject us to financial losses and regulatory sanctions and could seriously harm our reputation and negatively affect our business. It is not always possible to deter employee misconduct and the precautions taken to prevent and detect employee misconduct may not always be effective. Misconduct by employees could include engaging in unauthorized transactions or activities, failure to properly supervise other employees, engaging in improper or unauthorized activities on behalf of clients or improperly using confidential information. We cannot assure you that these types of proceedings will not materially and adversely affect us.

Employee errors, including mistakes in executing, recording or reporting transactions for clients, could cause us to enter into transactions that clients may disavow and refuse to settle, which could expose us to the risk of material losses until the errors are detected and the transactions are unwound or reversed. If our clients are not able to settle their transactions on a timely basis, the time in which employee errors are detected may be increased and our risk of material loss can be increased. The risk of employee error or miscommunication may be greater for products that are new or have non-standardized terms.

Misconduct by employees of our customers in dealing with us can also expose us to claims for financial losses or regulatory proceedings when it is alleged we or our employees knew or should have know that the employee of the customer was not authorized to undertake certain transactions.

In addition to the foregoing financial costs and risks associated with potential liability, the defense of litigation includes increased costs associated with attorneys’ fees. The amount of outside attorneys’ fees incurred in connection with the defense of litigation could be substantial and might materially and adversely affect our results of operations for any reporting period.

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Our compliance and risk management methods might not be effective, which could increase the risk that we are subject to regulatory action or litigation or otherwise negatively impact our business. Our ability to comply with applicable laws, rules and regulations is largely dependent on our establishment and maintenance of compliance, audit and reporting systems, as well as our ability to attract and retain qualified compliance and other risk management personnel. If we fail to effectively establish and maintain such compliance and reporting systems or fail to attract and retain personnel who are capable of designing and operating such systems, it will increase the likelihood that we will become subject to legal and regulatory infractions, including civil litigation and investigations by regulatory agencies.

For us to avoid a number of risks inherent in our business, it is necessary for us to have polices and procedures that identify, monitor and manage our risk exposure. Management of operational, legal and regulatory risk requires, among other things, policies and procedures to record properly and verify a large number of transactions and events. Such policies may not be fully effective. Some of our risk management policies and procedures depend upon evaluation of information regarding markets, customers or other matters that are publicly available or otherwise accessible by us. That information may not in all cases be accurate, complete, up-to-date or properly evaluated. Further, our risk management policies and procedures rely on a combination of technical and human controls and supervision, which are subject to error and failure. Some of our risk management policies and procedures are based on internally developed controls and observed historical market behavior and also involve reliance on industry standard practices. These policies and procedures may not adequately prevent future losses, particularly as they relate to extreme market movements, which may be significantly greater than comparable historical movements. We may not always be successful in monitoring or evaluating the risks to which we are or may be exposed. If our risk management efforts are ineffective, we could suffer losses that could have a material adverse effect on our financial condition or operating results.

We operate as a principal in the OTC derivatives markets which involves the risks associated with commodity derivative instruments. We offer OTC derivatives to our customers in which we act as a principal counterparty. We endeavor to simultaneously offset the commodity price risk of the instruments by establishing corresponding offsetting positions with commodity counterparties. To the extent that we are unable to simultaneously offset an open position or the offsetting transaction is not fully effective to eliminate the commodity derivative risk, we have market risk exposure on these unmatched transactions. Our exposure varies based on the size of the overall positions, the terms and liquidity of the instruments brokered, and the amount of time the positions remain open.

To the extent an unhedged position is not disposed of intra-day, adverse movements in the commodities underlying these positions or a downturn or disruption in the markets for these positions could result in a substantial loss. In addition, any principal gains and losses resulting from these positions could on occasion have a disproportionate effect, positive or negative, on our financial condition and results of operations for any particular reporting period.

Transactions involving OTC derivative contracts may be adversely affected by fluctuations in the level, volatility, correlation or relationship between market prices, rates, indices and/or other factors. These types of instruments may also suffer from illiquidity in the market or in a related market.

OTC derivative transactions are subject to unique risks. OTC derivative transactions are subject to the risk that, as a result of mismatches or delays in the timing of cash flows due from or to counterparties in OTC derivative transactions or related hedging, trading, collateral or other transactions, we or our counterparty may not have adequate cash available to fund its current obligations.

We could incur material losses pursuant to OTC derivative transactions because of inadequacies in or failures of our internal systems and controls for monitoring and quantifying the risk and contractual obligations associated with OTC derivative transactions and related transactions or for detecting human error, systems failure or management failure.

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OTC derivative transactions may be modified or terminated only by mutual consent of the original parties and subject to agreement on individually negotiated terms. Accordingly it may not be possible to modify, terminate or offset obligations or exposure to the risk associated with a transaction prior to its scheduled termination date.

We are subject to regulatory capital requirements and failure to comply with these rules would significantly harm our business. The CFTC and various other self-regulatory organizations have stringent rules with respect to the maintenance of specific levels of net capital by our FCM subsidiary. Failure to maintain the required net capital may subject a firm to limitations on its activities, including suspension or revocation of its registration by the CFTC and suspension or expulsion by the NFA, various exchanges of which our FCM subsidiary is a member and ultimately may require its liquidation. Failure to comply with the net capital rules could have material and adverse consequences such as limiting our operations, or restricting us from withdrawing capital from our FCM subsidiary.

If these net capital rules are changed or expanded, or if there is an unusually large charge against net capital, operations that require the intensive use of capital would be limited. Also, our ability to withdraw capital from our regulated subsidiaries is subject to restrictions, which in turn could limit our ability to pay dividends, repay debt and redeem or purchase shares of our common stock. A large operating loss or charge against net capital could adversely affect our ability to expand or even maintain our present levels of business, which could have a material adverse effect on our business. We cannot predict our future capital needs or our ability to obtain additional financing.

We are subject to margin funding requirements on short notice; failure to meet such requirements would significantly harm our business. Our business involves establishment and carrying of substantial open positions for customers on futures exchanges and in the OTC derivatives markets. We are required to post and maintain margin or credit support for these positions. Although we collect margin or other deposits from our customers for these positions, significant adverse price movements can occur which will require us to post margin or other deposits on short notice, whether or not we are able to collect additional margin or credit support from our customers. Although we maintain borrowing facilities for the purpose of funding margin and credit support and have systems to endeavor to collect margin and other deposits from customers on a same-day basis, there can be no assurance that these facilities and systems will be adequate to eliminate the risk of margin calls in the event of severe adverse price movements affecting open positions of our customers.

We must obtain and maintain credit facilities to operate; failure to maintain such facilities would require curtailment of our operations and result in losses. We are substantially dependent on credit facilities for liquidity and operational funding as well as to insure the availability of sufficient regulatory capital at our subsidiaries. These credit facilities are necessary in order to meet immediate margin funding requirements, to fund and carry ownership in cash commodities, and to maintain positions required for our own risk management position in futures and OTC markets. If our credit facilities are unavailable or insufficient to support our level of business activities, we may need to raise additional funds externally, either in the form of debt or equity. If we cannot raise additional funds on acceptable terms, we may not be able to develop or enhance our business, take advantage of future opportunities or respond to competitive pressure or unanticipated requirements.

Our international operations involve special challenges that we may not be able to meet, which could adversely affect our financial results. We engage in a significant amount of business with customers in Asia, Latin America and Canada, as well as other international markets. Certain additional risks are inherent in doing business in international markets, particularly in a regulated industry. These risks include:

• the inability to manage and coordinate the various regulatory requirements of multiple jurisdictions that are constantly evolving and subject to unexpected change,

• tariffs and other trade barriers,

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• difficulties in recruiting and retaining personnel, and managing international operations,

• difficulties of debt collection in foreign jurisdictions,

• potentially adverse tax consequences, and

• reduced protection for intellectual property rights.

Our operations are also subject to the political, legal and economic risks associated with politically unstable and less developed regions of the world, including the risk of war and other international conflicts and actions by governmental authorities, insurgent groups, terrorists and others. Specifically, we conduct business in countries whose currencies may be unstable. Future instability in such currencies or the imposition of governmental or regulatory restrictions on such currencies could impede our foreign exchange business and our ability to collect on collateral held in such currencies.

In addition, we are required to comply with the laws and regulations of foreign governmental and regulatory authorities of each country in which we conduct business. These may include laws, rules and regulations, including registration requirements. Our compliance with these laws and regulations may be difficult and time consuming and may require significant expenditures and personnel requirements, and our failure to be in compliance would subject us to legal and regulatory liabilities. We have customers in numerous countries around the world in which we are not registered. As a result, we may become subject to the regulatory requirements of those countries. We may also experience difficulty in managing our international operations because of, among other things, competitive conditions overseas, established domestic markets, language and cultural differences and economic or political instability. Any of these factors could have a material adverse effect on the success of our international operations or limit our ability to grow our international operations and, consequently, on our business, financial condition and operating results.

Although most of our international business is settled in U.S. dollars, our international operations also expose us to the risk of fluctuations in currency exchange rates. Our risk management strategies relating to exchange rates may not prevent us from suffering losses that would adversely affect our financial condition or results of operations.

If we are unable to manage any of these risks effectively, our business could be adversely affected.

We buy and sell agricultural commodities and agricultural commodity products in our business, the demand for which can be affected by weather, disease and other factors beyond our control. Weather conditions, disease and other factors have historically caused volatility in the agricultural commodities industry and consequently in our operating results by causing crop failures or significantly reduced or increased harvests, which can affect the supply and pricing of the agricultural commodities that we buy and sell in our business, reduce the demand for our fertilizer products and negatively affect the creditworthiness of our customers and suppliers. Reduced supply of agricultural commodities due to weather-related factors could adversely affect our profitability in the future.

Our grain merchandising activities involve numerous business risks. Our grain merchandising activities depend on our ability to earn a margin on bushels of grain purchased and sold. We can incur losses if the sale price, after taking into account hedge gains and losses, is less than the purchase price, if the purchase price cannot be collected or if there are uncovered losses relating to physical quality or uncovered risk of casualty losses. We attempt to mitigate the losses by appropriate policies and practices, but there can be no assurance that such efforts will be sufficient to avoid losses.

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Our financial services activities involve substantial operational risk. We are exposed to various kinds of operational risks relating to the underlying commodities that form the basis of our financial services transactions. Losses in and to these commodities, which could be caused by fraud, misappropriation or other uninsured loss, could cause loss to us. Many of our financial services transactions depend on documents of title issued to, or held by, us. If such documents were invalid or not fully enforceable, it could cause a material loss. There are government programs that back grain warehouse receipts, but these could be inadequate to fully reimburse us for the value of grain evidenced by our warehouse receipts in the event of the business failure of the issuer of the receipt.

Computer systems failures, capacity constraints and breaches of security could increase our operating costs and cause us to lose clients. We are heavily dependent on the capacity and reliability of the computer and communications systems supporting our operations, whether owned and operated internally or by third parties. We receive and process a large portion of our trade orders through electronic means, such as through public and private communications networks. These computer and communications systems and networks are subject to performance degradation or failure from any number of reasons, including loss of power, acts of war or terrorism, human error, natural disasters, fire, sabotage, hardware or software malfunctions or defects, computer viruses, intentional acts of vandalism, customer error or misuse, lack of proper maintenance or monitoring and similar events. Our systems, or those of our third party providers, may fail or operate slowly, causing one or more of the following:

• unanticipated disruptions in service to our clients,

• slower response times,

• delays in our clients’ trade execution,

• failed settlement of trades,

• decreased client satisfaction with our services,

• incomplete, untimely or inaccurate accounting, recording, reporting or processing of trades,

• financial losses,

• litigation or other client claims, and

• regulatory sanctions.

The occurrence of degradation or failure of the communications and computer systems on which we rely may lead to financial losses, litigation or arbitration claims filed by or on behalf of our customers and regulatory investigations and sanctions, including by the CFTC, which require that our trade execution and communications systems be able to handle anticipated present and future peak trading volumes. Any such degradation or failure could also have a negative effect on our reputation, which in turn could cause us to lose existing customers to our competitors or make it more difficult for us to attract new customers in the future. Further, any financial loss that we suffer as a result of such degradations or failures could be magnified by price movements of contracts involved in transactions impacted by the degradation or failure, and we may be unable to take corrective action to mitigate any losses we suffer.

We must keep up with rapid technological changes in order to compete effectively. The markets in which we compete are characterized by rapidly changing methods, evolving customer demand and uses of our services, frequent product and service introductions employing new methods and the emergence of new industry standards and practices that could render our existing systems obsolete. Our future success will depend in part on our ability to anticipate and adapt to these changes. Any upgrades or expansions may require significant expenditures of funds and may also increase the probability that we will suffer system degradations and failures. We may not have sufficient funds to adequately update and expand our networks, and any upgrade or expansion attempts may not be successful and accepted by the marketplace and our customers. Any failure to adequately update and

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expand our systems and networks or to adapt our systems to evolving customer demands or emerging industry standards would have a material adverse effect on our business.

We depend on third-party software licenses. The loss of any of our key licenses could adversely affect our ability to provide our brokerage services. We license software from third parties, some of which is integral to our business. These licenses are generally terminable if we breach our obligations under the licenses or if the licensor gives us notice in advance of the termination. If any of these relationships were terminated, or if any of these third parties were to cease doing business, we may be forced to spend significant time and money to replace the licensed software. These replacements may not be available on reasonable terms, if at all. A termination of any of these relationships could have a material adverse effect on our financial condition and results of operations.

We may not be able to protect our intellectual property rights or may be prevented from using intellectual property necessary for our business. We rely primarily on trade secret, contract, copyright and trademark law to protect our proprietary information and methods. It is possible that third parties may copy or otherwise obtain and use our proprietary information and methods without authorization or otherwise infringe on our rights. We may also face claims of infringement that could interfere with our ability to use information and methods that are material to our business operations.

In the future, we may have to rely on litigation to enforce our intellectual property rights, protect our trade secrets, determine the validity and scope of the proprietary rights of others or defend against claims of infringement or invalidity. Any such litigation, whether successful or unsuccessful, could result in substantial costs and the diversion of resources and the attention of management, any of which could negatively affect our business.

Our operating results are subject to significant fluctuations due to seasonality. As a result, you should not rely on our operating results in any particular period as an indication of our future performance. In the past, our business has experienced seasonal fluctuations, reflecting reduced trading activity during summer months, particularly in August. We also generally experience reduced activity in December due to seasonal holidays. Traditional commodity derivatives, such as grain and energy, will reflect changing supply/demand factors related to heating/cooling and planting/harvesting seasons. As a result, our quarterly operating results may not be indicative of the results we expect for the full year. Our operating results may also fluctuate quarter to quarter due to a variety of factors beyond our control such as conditions in the global financial markets, terrorism, war and other economic and political events. Furthermore, we may experience reduced revenues in a quarter due to a decrease in the number of business days in that quarter.

Restrictions on our eligibility to borrow may restrict our ability to pursue our business strategies. A majority of our company’s ownership must be held by cooperatives in order to maintain our eligibility to borrow from CoBank, ACB. As a result of this offering, cooperatives that are our stockholders will be able to sell their common stock, which, in the future, may cause a violation of this requirement. It is uncertain whether we will be able to find substitute lines of credit on similar or better terms.

We will be exposed to risks relating to the evaluation of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002. As of August 31, 2007, we will be subject to the requirements of Section 404 of the Sarbanes-Oxley Act and the SEC rules and regulations require an annual management report on our internal controls over financial reporting, including, among other matters, management’s assessment of the effectiveness of our internal control over financial reporting, and an attestation report by our independent registered public accounting firm addressing these assessments.

We are in the process of evaluating, testing and implementing internal controls over financial reporting. While we anticipate being compliant with the requirements of Section 404 by our deadline, we cannot be certain as to the timing of the completion of our evaluation, testing and remediation actions or the impact of the same on

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our operations. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, we may be subject to investigation and sanctions by regulatory authorities, such as the SEC and our common stock may be subject to delisting by the NASDAQ Global Market.

Moreover, if we are unable to assert that our internal control over financial reporting is effective in any future period (or if our auditors are unable to express an opinion on the effectiveness of our internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports, which may have a material adverse effect on our company.

Our compliance with Section 404 of the Sarbanes-Oxley Act may require significant expenses and management resources that would need to be diverted from our other operations and could require a restructuring of our internal controls over financial reporting. Any such expenses, time reallocations or restructuring could have a material adverse effect on our operations.

Risks Relating to the Offering

There has been no prior public market for our common stock, and we cannot assure you that an active trading market in our stock will develop or be sustained. Prior to this offering, there has been no public market for our common stock. We cannot assure you that an active trading market in our common stock will develop or be sustained after this offering. Although we intend to list our common stock on the NASDAQ Global Market, we do not know whether third parties will find our common stock to be attractive or whether firms will be interested in making a market for our stock. The initial public offering price of our common stock will be determined through negotiations between us and the representatives of the underwriters and thus may not be indicative of the market price for our common stock after this offering. Consequently, you may not be able to resell your shares above the initial public offering price and may suffer a loss on your investment.

Sales of our common stock may have an adverse impact on its market price. Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that large sales could occur, could cause the market price of the common stock to decline. Either of these circumstances could also limit our future ability to raise capital through an offering of equity securities. After giving effect to this offering, the reincorporation and a             -for-one stock split effected as a stock dividend, there will be             shares of our common stock issued and outstanding, or              shares if the underwriters exercise their over-allotment option in full. All of the shares of our common stock sold in this offering will be freely tradable without restriction or further registration under the Securities Act by persons other than our “affiliates” within the meaning of Rule 144 under the Securities Act.

Our currently issued and outstanding shares of common stock are registered under the Securities Act but are subject to significant transfer restrictions. These transfer restrictions will gradually expire over a 540-day period following this offering. Upon expiration, the common stock held by existing shareholders will be freely transferable unless held by “affiliates” within the meaning of Rule 144 under the Securities Act. If stockholders of our company sell a large number of shares of our common stock upon the expiration of some or all of these restrictions, the market price for the common stock could decline significantly.

Our stock price may be volatile. The initial public offering price of our common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of the market price of our common stock after this offering or the price at which our common stock may be sold in the public market after the offering. Factors such as variations in our financial results, announcements by us or others, developments affecting us and general market volatility could cause the market price of our common stock to fluctuate significantly.

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If securities or industry analysts do not publish research or reports about our business, if they change their recommendations regarding our stock adversely or if our operating results do not meet their expectations, our stock price and trading volume could decline. The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock or if our operating results do not meet their expectations, our stock price could decline.

Provisions of our charter documents or Delaware law could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for you to change management. Following the reincorporation, our certificate of incorporation, bylaws and Delaware law will contain certain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change of control of our company or changes in management that our stockholders might deem advantageous. These provisions include:

• the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms, including preferences and voting rights, of those shares without stockholder approval,

• a classified board of directors having staggered three-year terms,

• the inability of stockholders to call special meetings of stockholders,

• a prohibition on stockholder action by written consent, and

• advance notice requirements for nominations for election to our board of directors or for proposing matters that stockholders may act on at stockholder meetings.

In addition, we are subject to certain Delaware laws, including one that prohibits us from engaging in a business combination with any stockholder for a period of three years from the date the person became an interested stockholder unless certain conditions are met. All of this may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors other than the candidates nominated by our board.

Our businesses are heavily regulated and some of our regulators require that they approve transactions which could result in a change of control, as defined by the then-applicable rules of our regulators. The requirement that this approval be obtained may prevent or delay transactions that would result in a change of control.

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FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements regarding, among other things, our plans, strategies and prospects, both business and financial. All statements other than statements of current or historical fact contained in this prospectus are forward-looking statements. The words “believe,” “expect,” “anticipate,” “should,” “plan,” “will,” “may,” “could,” “intend,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms and similar expressions, as they relate to us, are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. They can be affected by inaccurate assumptions, including the risks, uncertainties and assumptions described in “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking statements in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. When you consider these forward-looking statements, you should keep in mind these risk factors and other cautionary statements in this prospectus.

Our forward-looking statements speak only as of the date of this prospectus. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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USE OF PROCEEDS

We expect to receive net proceeds from this offering of approximately $                     million, after deducting underwriting discounts, commissions and other offering-related expenses, at an assumed offering price of $                     per share, the mid-point of the offering range set forth on the cover of this prospectus. We intend to use the net proceeds from this offering:

• to redeem, pro rata,              shares of our outstanding common stock held by the holders of record of our common stock immediately prior to the consummation of the offering, at a redemption price per share equal to the net proceeds per share received by us in the offering, or $                     million in the aggregate, assuming an offering price of $            , the mid-point of the offering range set forth on the cover of this prospectus, constituting     % of the shares of common stock outstanding prior to the offering,

• to reduce subordinated and general corporate debt by $            ,

• to increase the regulatory capital of our FCM subsidiary by $            , and

• for general corporate purposes.

We retain broad discretion in the allocation and use of such proceeds, since the amounts that we will actually expend for working capital will vary significantly depending on a number of factors, including future revenue growth, if any, and the amount of cash we generate from operations. Pending the uses of proceeds described above, we intend to invest the net proceeds of this offering in short-term, interest-bearing investment grade securities.

The subordinated and general corporate debt to be reduced consists of a subordinated debt credit facility owed to Deere Credit Inc., which matures on October 1, 2009, accruing interest at a rate of 10.2%, and a general corporate credit facility owed to Deere Credit, maturing on October 1, 2009, accruing interest at a rate of 8.3%. During the past twelve months, we have borrowed approximately $6.0 million under the general corporate credit facility to fund the $2.0 million acquisition of New York Mercantile Exchange (“NYMEX”) stock, $1.0 million for an investment in Green Diesel, LLC, $1.5 million loan to FCStone Merchants Services, LLC, $1.0 million for a loan to FGDI and $500,000 to fund a secured loan to a customer to acquire a New York Board of Trade (“NYBOT”) seat.

DIVIDEND POLICY

The board of directors declared a regular dividend payable on a per share basis to holders of common stock in the total amount of $2.9 million on October 27, 2005. Future regular dividends may be declared and paid at the discretion of the board of directors. Any determination to pay cash dividends will be at the discretion of our board of directors, and will depend upon our results of operations and cash flows, our financial position and capital requirements, general business conditions, legal, tax, regulatory, rating agency and any contractual restrictions on the payment of dividends and any other factors our board of directors deems relevant.

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CAPITALIZATION

The following table sets forth the actual capitalization of FCStone Group as of May 31, 2006, and as adjusted to reflect:

• the issuance and sale by us of              shares of common stock in this offering at an assumed initial public offering price of $                     per share, based on a mid-point of the offering range set forth on the cover of this prospectus, our payment of underwriting discounts and commissions and our estimated offering expenses,

• the redemption of              shares of common stock held by holders of record of common stock immediately prior to the consummation of the offering in the aggregate amount of $                     million,

• reduction of notes payable and subordinated debt by $                , and

• a             -for-1 stock split, which will be effectuated as a stock dividend prior to the consummation of this offering.

This capitalization table should be read in conjunction with “Selected Historical Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes included elsewhere in this prospectus.

	As of May 31, 2006
	Actual			As Adjusted
	(In thousands)
	(unaudited)
Cash and cash equivalents—Unrestricted	$	44,609		$
Debt outstanding:
Notes payable		83,403
Subordinated debt		7,000
Total debt outstanding		90,403
Redeemable common stock held by employee stock ownership plan (ESOP)		6,079
Stockholders’ equity
Common stock, no par value, authorized 20,000,000, issued and outstanding 4,845,736		21,747
Accumulated other comprehensive loss		(4,555	)
Retained earnings		41,175
		58,367
Less maximum cash obligation related to ESOP shares		(6,079	)
Total stockholders’ equity		52,288
Total capitalization	$	148,770		$

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The table shown below presents our summary financial data at the date and for the periods indicated. The summary financial data as of August 31, 2004 and August 31, 2005 and for each of the years in the three-year period ended August 31, 2005 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary financial data as of August 31, 2001, 2002 and 2003 and for each of the years in the two-year period ended August 31, 2003 have been derived from our audited consolidated financial statements that are not included in this prospectus. The summary financial data as of and for the nine-month periods ended May 31, 2005 and 2006 have been derived from our unaudited consolidated financial statements which are included elsewhere in this prospectus and include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the data for the periods. Operating results for the nine months ended May 31, 2006 are not necessarily indicative of the results that may be expected for the entire year ending August 31, 2006. Historical per share data has been omitted for each fiscal year prior to the fiscal year 2005 because under our previous cooperative structure in place during those periods, earnings of the cooperative were distributed as patronage dividends to members based on the level of business conducted with the cooperative as opposed to common stockholder’s proportionate share of underlying equity in the cooperative. This prospectus does not include the financial statements of New FCStone, Inc. because it has only been formed recently for the purpose of effecting the offering and until the consummation of the reincorporation described above, will hold no material assets and will not engage in any operations.

You should read the data set forth below in conjunction with our consolidated financial statements and the related notes thereto, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Capitalization,” and other financial information included elsewhere in this prospectus.

	Year Ended August 31,											Nine Months Ended May 31,
	2001		2002		2003		2004		2005			2005		2006
	(dollars in thousands, except per share amounts)											(unaudited)
Statement of Operations Data:
Revenues:
Commissions and clearing fees	$	33,473	$	41,025	$	48,947	$	67,594	$	76,674		$	54,840	$	74,635
Service, consulting and brokerage fees		8,734		10,834		10,566		12,008		18,913			13,244		24,598
Interest		6,011		3,634		4,610		3,982		8,177			5,269		15,277
Other		2,503		2,088		4,299		4,521		7,463			4,720		2,480
Sales of commodities		638,870		838,361		1,164,334		1,536,209		1,290,620			1,028,876		860,678
Total revenues		689,591		895,942		1,232,756		1,624,314		1,401,847			1,106,949		977,668
Costs and expenses:
Cost of commodities sold		630,492		826,544		1,150,608		1,519,221		1,275,094			1,015,435		848,480
Employee compensation and broker commissions		20,020		23,952		25,955		30,160		32,578			24,000		30,663
Pit brokerage and clearing fees		7,903		11,557		16,382		26,713		33,141			23,900		33,626
Introducing broker commissions		6,441		7,802		8,551		10,704		14,459			9,890		15,575
Employee benefits and payroll taxes		3,510		4,707		5,971		7,136		8,044			5,990		7,292
Interest		1,217		1,297		3,040		4,418		3,946			2,895		4,335
Depreciation and amortization		769		892		837		861		1,551			1,147		1,214
Bad debt expense		—		310		76		716		4,077			1,163		1,709
Other expenses		11,439		13,613		15,270		15,365		18,926			14,183		16,824
Total costs and expenses		681,791		890,674		1,226,690		1,615,294		1,391,816			1,098,603		959,718
Income before income tax expense and minority interest		7,800		5,268		6,066		9,020		10,031			8,346		17,950
Minority interest		242		600		561		576		(499	)		494		(370	)
Income after minority interest and before income taxes		7,558		4,668		5,505		8,444		10,530			7,852		18,320
Income tax expense		1,590		1,280		1,200		2,030		3,950			2,950		6,950
Net income	$	5,968	$	3,388	$	4,305	$	6,414	$	6,580		$	4,902	$	11,370
Basic and diluted shares outstanding(1)										4,357			4,315		4,829
Basic and diluted earnings per share(1)									$	1.51		$	1.14	$	2.35

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	August 31,										May 31,
	2001		2002		2003		2004		2005		2005		2006
	(dollars in thousands)										(unaudited)
Statement of Financial Conditon:
Total Assets	$	271,911	$	399,526	$	504,733	$	603,827	$	805,522	$	612,554	$	1,163,562
Notes payable and subordinated debt		25,179		66,013		76,548		47,281		42,411		56,473		90,403
Obligations under capital leases		—		—		5,363		4,675		4,125		4,263		3,713
Minority interest		3,243		3,758		4,109		5,488		4,755		5,749		3,463
Redeemable common stock held by employee stock ownership plan (ESOP)(2)		—		—		—		—		4,487		—		6,079
Capital stock and equity	$	35,068	$	35,172	$	35,827	$	39,829	$	45,185	$	45,458	$	52,288

	Year Ended August 31,															Nine Months Ended May 31,
	2001			2002			2003			2004			2005			2005			2006
	(dollars and volumes in thousands)															(unaudited)
Segment and Other Data:
Income (loss) before minority interest and income tax expense:
Commodity and Risk Management Services	$	8,337		$	5,591		$	6,676		$	7,907		$	11,160		$	6,067		$	15,731
Clearing and Execution Services		246			863			947			3,359			5,152			3,787			8,483
Financial Services		—			—			109			(447	)		556			552			(102	)
Grain Merchandising		1,940			2,002			1,869			2,230			(2,037	)		1,253			(911	)
Corporate		(2,723	)		(3,188	)		(3,535	)		(4,029	)		(4,800	)		(3,313	)		(5,251	)
	$	7,800		$	5,268		$	6,066		$	9,020		$	10,031		$	8,346		$	17,950
Revenues, net of cost of commodities sold(3)	$	59,099		$	69,398		$	82,148		$	105,093		$	126,753		$	91,514		$	129,188
EBITDA(3)	$	9,544		$	6,857		$	9,382		$	13,723		$	16,027		$	11,894		$	23,869
Return on equity		17.7	%		9.5	%		11.7	%		16.5	%		15.4	%		15.5	%		32.1	%
Exchange contract trading volume		6,137			10,648			16,268			29,911			36,240			26,566			34,500
Customer segregated assets, end of period	$	190,861		$	262,482		$	246,215		$	389,953		$	594,733		$	402,260		$	825,344

(1) The calculation of the basic and diluted shares outstanding for the year ended August 31, 2005 and the nine months ended May 31, 2005 assumes the shares issued as a result of the restructuring had been issued and outstanding for the full periods. Historical earnings per-share data has been omitted for fiscal years prior to 2005 because earnings were distributed as patronage dividends to members based on the level of business conducted.

(2) In the event a terminated plan participant desires to sell his or her shares of common stock, we may be required to purchase the shares from the participant at their appraised value. Redeemable common stock held by the ESOP represents our maximum obligation to purchase common stock distributed to a terminated plan participant based upon the most recent appraised value as of the applicable date. Upon completion of the offering described in this prospectus, our obligation to purchase such shares of common stock will cease in accordance with the terms of the ESOP.

(3) See “Non-GAAP Financial Measures” below.

Non-GAAP Financial Measures

The body of U.S. generally accepted accounting principles is commonly referred to as “GAAP.” A non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted under applicable GAAP guidance. In this prospectus, we disclose EBITDA and revenues, net of cost of commodities sold, both of which are non-GAAP financial measures. EBITDA is not a substitute for the GAAP measures of net income (loss) or cash flows. Revenues, net of cost of commodities sold, is not a substitute for the GAAP measure of total revenues.

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EBITDA

EBITDA consists of net income (loss) before interest expense, income tax expense and depreciation and amortization. We have included EBITDA in this prospectus because our management uses it as an important supplemental measure of our performance and believes that it is frequently used by securities analysts, investors and other interested persons in the evaluation of companies in our industry, some of which present EBITDA when reporting their results. We regularly use EBITDA to evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates. Our management also believes that EBITDA is a useful tool for measuring our ability to meet our future debt service, capital expenditures and working capital requirements, and EBITDA is commonly used by us to measure our ability to service indebtedness. EBITDA is not a substitute for the GAAP measures of net income (loss) or cash flows and is not necessarily a measure of our ability to fund our cash needs. In addition, it should be noted that companies calculate EBITDA differently and, therefore, EBITDA as presented for us may not be comparable to EBITDA reported by other companies. EBITDA has material limitations as a performance measure because it excludes interest expense, income tax expense and depreciation and amortization. The following table reconciles EBITDA with our net income.

	Year Ended August 31,										Nine Months Ended May 31,
	2001		2002		2003		2004		2005		2005		2006
	(dollars in thousands)
Net income	$	5,968	$	3,388	$	4,305	$	6,414	$	6,580	$	4,902	$	11,370
Plus: interest expense		1,217		1,297		3,040		4,418		3,946		2,895		4,335
Plus: depreciation and amortization		769		892		837		861		1,551		1,147		1,214
Plus: income tax expense		1,590		1,280		1,200		2,030		3,950		2,950		6,950
EBITDA	$	9,544	$	6,857	$	9,382	$	13,723	$	16,027	$	11,894	$	23,869

Revenues, Net of Cost of Commodities Sold

Revenues, net of cost of commodities sold, consists of total revenues presented as determined in accordance with GAAP, less the cost of commodities sold. Revenues, net of cost of commodities sold, is a non-GAAP financial measure that is used in this prospectus because our management considers it an important supplemental measure of our performance. Management believes revenues, net of cost of commodities sold, is a more relevant measure of our economic interest in these commodities transactions because it removes the effect of commodity price driven changes in revenue and cost of commodities sold, which may not have a meaningful effect on net income. In managing our business, management has historically focused on revenues derived from sales of commodities, net of cost of commodities sold. This financial measure is meaningful in managing our business for several reasons. First, profit is driven more by the margin on commodities sold rather than the price of the commodities. Second, we generally establish the margin between the sales price and the cost at the time we enter into a transaction, eliminating the need to manage inventory cost. Lastly, analyzing consolidated costs and expenses as a percentage of total revenue is not meaningful because total revenues related to commodity sales is a disproportionately large number compared to margin. Measuring expense as a percentage of revenues, net of cost of commodities sold, provides a clearer understanding of the trends in costs and expenses and expense management.

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The following table reconciles revenues, net of cost of commodities sold, with our total revenues.

	Year Ended August 31,										Nine Months Ended May 31,
	2001		2002		2003		2004		2005		2005		2006
	(dollars in thousands)
Revenues:
Commissions and clearing fees	$	33,473	$	41,025	$	48,947	$	67,594	$	76,674	$	54,840	$	74,635
Service, consulting and brokerage fees		8,734		10,834		10,566		12,008		18,913		13,244		24,598
Interest		6,011		3,634		4,610		3,982		8,177		5,269		15,277
Other		2,503		2,088		4,299		4,521		7,463		4,720		2,480
Sales of commodities		638,870		838,361		1,164,334		1,536,209		1,290,620		1,028,876		860,678
Total revenues	$	689,591	$	895,942	$	1,232,756	$	1,624,314	$	1,401,847	$	1,106,949	$	977,668
Less: Cost of commodities sold		630,492		826,544		1,150,608		1,519,221		1,275,094		1,015,435		848,480
Revenues, net of cost of commodities sold	$	59,099	$	69,398	$	82,148	$	105,093	$	126,753	$	91,514	$	129,188

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition, results of operations and liquidity and capital resources for the three fiscal years ended August 31, 2005, and the nine month periods ended May 31, 2005, and 2006. You should read this section together with our audited and unaudited consolidated financial statements and related notes included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategies for our business, includes forward-looking statements that involve risks and uncertainties. You should review “Risk Factors” for a discussion of important factors that could cause actual results to differ materially from the results described in, or implied by, the forward-looking statements contained in this prospectus. Compounded annual rates of increase/decrease for the two years and nine months ended May 31, 2006 have been calculated by annualizing the nine month period ended May 31, 2006.

Overview and Corporate Structure

We are an integrated commodity risk management company providing risk management consulting and transaction execution services to commercial commodity intermediaries, end-users and producers. We assist primarily middle market customers in optimizing their profit margins and mitigating commodity price risk. In addition to our risk management consulting services, we operate one of the leading independent clearing and execution platforms for exchange-traded futures and options contracts. In fiscal 2005, we served more than 7,500 customers and in the twelve months ended May 31, 2006, transacted more than 44.3 million contracts in the exchange-traded and OTC markets. As a natural complement to our commodity risk management consulting services, we also assist our customers with the financing, transportation and merchandising of their physical commodity inventories.

In the mid 1990’s, utilizing the expertise developed in providing risk management consulting services to our traditional grain-related customers, we began a period of growth driven by our strategic decision to expand into new products and customer segments. This expansion was further accelerated when we acquired Saul Stone & Company, which enhanced our execution and clearing capabilities and gave us the ability to clear all U.S. exchange-traded commodity futures and options contracts. As our business expanded, revenues from customers who were not among our cooperative members increased significantly. In late 2004, we recognized the need to align our corporate structure with the changed dynamics of our business and to provide access to capital to finance anticipated increases in our CFTC regulatory capital requirements. In March 2005, our members approved a restructuring plan, which resulted in our ceasing to operate as a cooperative and converted the interests of our members into common stock. Although the restructuring changed our ownership structure, our conversion did not have a meaningful impact on the way we operate our business. We seek to pursue opportunities for growth in our business by offering new products and services to our customers, and we expect this trend to continue.

We operate in four reportable segments consisting of Commodity and Risk Management Services (“C&RM”), Clearing and Execution Services, Financial Services and Grain Merchandising. We also report a Corporate and Other segment, which contains corporate expenses and equity investments not directly attributable to our operating segments.

Our profitability is primarily driven by the C&RM and Clearing and Execution Services segments of our business, as shown in the table below. While the revenues of our Grain Merchandising segment represent a large proportion of our total revenue, that segment is characterized by low operating profit margins. As a result, it is important that you read our consolidated financial statements in conjunction with the segment disclosure included below and in the notes to our consolidated financial statements. The following table sets forth for each

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segment the income (loss) before minority interest and income tax expense for each of the three fiscal years ended August 31, 2005, and the nine months ended May 31, 2005 and 2006.

	Year Ended August 31,									Nine Months Ended May 31,
	2003			2004			2005			2005			2006
	(in thousands)
Commodity and Risk Management Services	$	6,676		$	7,907		$	11,160		$	6,067		$	15,731
Clearing and Execution Services		947			3,359			5,152			3,787			8,483
Financial Services		109			(447	)		556			552			(102	)
Grain Merchandising		1,869			2,230			(2,037	)		1,253			(911	)
Corporate and Other		(3,535	)		(4,029	)		(4,800	)		(3,313	)		(5,251	)
Income before minority interest and income tax expense	$	6,066		$	9,020		$	10,031		$	8,346		$	17,950

Factors that Affect Our Business

Our results of operations have been, and we expect will continue to be, affected principally by customer acceptance of risk management, commodity price volatility, transaction volumes, interest rates and our ability to develop new products for our customers.

Customer Acceptance of Risk Management

The growing sophistication of company managers and the heightened expectations of investors have increased the acceptance of commodity risk management strategies. Demand for risk management consulting services is growing in industries that have not traditionally been significant users of hedging techniques and the derivatives market. This increased demand drives our fee revenue from risk management consulting services and our commission and interest income generated from the trading activity of our customers. As we expand our customer base beyond the traditional users of derivative products, our ability to provide an analysis of the commodity markets and advise our customers about how to manage the commodity risk inherent in their businesses will continue to be an important driver in our ability to generate future revenues.

Commodity Price Volatility

Rising commodity price volatility historically has led to increases in transaction volume and better financial performance in both our C&RM and Clearing and Execution Services segments. High commodity price volatility affects our financial performance by increasing the uncertainty of the profit margins of intermediaries, end-users and producers, which ultimately leads them to derivatives as a way of mitigating their financial risk from changing prices. At the same time, market volatility creates opportunities for professional traders, who find derivatives a more efficient way to transact relative to traditional physical commodities. In general, high commodity price volatility increases the demand for risk management consulting services and trade execution and clearing by commodity producers, intermediaries, end-users and professional traders.

Transaction Volumes

Since 2001, market transaction volume, as measured by numbers of contracts, has increased due to higher commodity price volatility, product innovation and a shift to electronic trading. As noted above, high commodity price volatility results in increased demand for risk management consulting services and increased transaction volumes. In addition, product innovation in both the international exchange-traded and OTC markets has resulted in higher transaction volumes. The continued convergence of derivatives and cash markets and the expanded use of derivatives for hedging and investment purposes have been the primary drivers of this industry trend. The shift from open outcry, pit-based trading to electronic trading platforms has increased trading volume as customers are drawn to more efficient and lower cost markets.

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Interest Rates

The level of prevailing short-term interest rates affects our profitability because a portion of our revenue is derived from interest earned from the investment of funds deposited with us by customers in our C&RM and Clearing and Execution Services segments. Our financial performance generally benefits from rising interest rates. Rising interest rates increase the amount of interest income earned from these customer deposits. In contrast, declining interest rates decrease the amount of interest income earned on customer deposits.

Product Development

Our ability to develop customized products to meet our customers’ specialized needs affects the overall profitability of our operations. These customized products often have unique and complex structures based on OTC traded contracts and we provide value-added service components to our customers that make these products more profitable for us.

Statement of Operations

Revenues

Our revenues are comprised of: (1) commissions and clearing fees, (2) risk management service, consulting and related brokerage fees, (3) interest income, (4) other revenues and (5) sales of physical commodities.

Commissions and clearing fees. Commissions and clearing fees represent revenues generated from exchange-traded transactions that we execute or clear in our C&RM and Clearing and Execution Services segments. Commissions and clearing fee revenue is a product of the number of transactions we process for our customers and the rate charged on those transactions. The rate that we charge our customers varies by type of customer, type of transaction and a customer’s volume of trading activity. The following table shows commissions and clearing fees and the number of exchange-traded contracts that we have executed or cleared for our customers in the C&RM and Clearing and Execution Services segments over the three fiscal years ended August 31, 2005, and nine months ended May 31, 2005 and 2006.

	Year Ended August 31,						Nine Months Ended May 31,
	2003		2004		2005		2005		2006
Commissions and clearing fees (in thousands)	$	48,947	$	67,594	$	76,674	$	54,840	$	74,635
Exchange contract volume (in millions)		16.3		29.9		36.2		26.6		34.5

Exchange-traded contract volume increased at a compound annual growth rate (“CAGR”) of approximately 29.4% over the period from $48.9 million in fiscal 2003, to $74.6 million in the nine months ended May 31, 2006. This growth was primarily due to increased trading of energy products and was also due to new customers in the Clearing and Execution Services segment, as well as new customers in the renewable fuels and the Latin America/China divisions within the C&RM segment.

Service, consulting and brokerage fees. Service, consulting and brokerage fees are revenue generated in the C&RM segment. Service revenues are monthly fees charged to IRMP customers for customized risk management consulting services. Brokerage fees are generated from OTC derivative trades executed with our customers and with other counterparties. These brokerage fees vary on a per trade basis depending on the level of service provided and the type of transaction. Consulting fees are primarily fees we charge for providing various other risk management-related consulting services to customers, which are generally performed on either a monthly or project-by-project basis. The following table sets forth our service, consulting and brokerage fees and OTC contract volume for the three fiscal years ended August 31, 2005, and the nine months ended May 31, 2005 and 2006.

	Year Ended August 31,						Nine Months Ended May 31,
	2003		2004		2005		2005		2006
					($ in thousands)
Service, consulting and brokerage fees	$	10,566	$	12,008	$	18,913	$	13,244	$	24,598
OTC contract volume		54,180		62,810		152,957		125,450		201,807

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Service, consulting and brokerage fees have increased at a CAGR of approximately 51.0% over the period from $10.6 million in fiscal 2003, to $24.6 million in the nine months ended May 31, 2006. This increase was primarily due to a 79.1% compounded annual increase in OTC contract volume during that period. OTC volume is higher primarily due to new products in our commodity risk management business and due to new customers in the Latin America and renewable fuels divisions. Another source of the increase in this revenue category has been an increase in the average fees from our IRMP clients.

Interest income. Interest income is revenue generated from customer funds deposited with us to satisfy margin requirements and from our internally-generated cash balances invested at short-term interest rates. In addition, we earn interest income from financing fees related to grain inventory repurchase programs within our Financial Services segment. Interest revenue is primarily driven by the level of customer segregated assets deposited with us and the level of short-term interest rates. The level of customer segregated assets deposited with us is directly related to transaction volume and open contract interest of our customers. The following table sets forth interest income, customer segregated assets and 90-day Treasury bill rates for the three fiscal years ended August 31, 2005, and for the nine months ended May 31, 2005 and 2006.

	Year Ended August 31,									Nine Months Ended May 31,
	2003			2004			2005			2005			2006
							($ in thousands)
Interest income	$	4,610		$	3,982		$	8,177		$	5,269		$	15,277
Customer segregated assets, end of period	$	246,215		$	389,953		$	594,733		$	402,260		$	825,344
90-day Treasury bill average rates for period		1.19	%		1.06	%		2.60	%		2.36	%		4.26	%

Interest income has increased at a CAGR of approximately 71.7% over the period from $4.6 million in fiscal 2003, to $15.3 million in the nine months ended May 31, 2006. This increase is primarily the result of higher short-term interest rates and an increase in investable customer segregated assets, which is related to the increase in contract trading volume.

Other revenues. Other revenues represents revenue generated from ocean vessel dockage and related income in our Grain Merchandising segment, profit-share arrangements in our Financial Services segment and income from equity investments. Additionally, we have historically included income received from non-recurring items such as litigation settlements, gains on the sale of exchange membership stock or exchange seats and other non-recurring items which can vary significantly. The following table sets forth other revenues for the three fiscal years ended August 31, 2005, and the nine months ended May 31, 2005, and 2006.

	Year Ended August 31,						Nine Months Ended May 31,
	2003		2004		2005		2005		2006
					(in thousands)
Other revenues	$	4,299	$	4,521	$	7,463	$	4,720	$	2,480

Other revenues have decreased at a compounded annual rate of 9.1% over the period from $4.3 million in fiscal 2003 to $2.5 million in the nine months ended May 31, 2006. In fiscal 2005, we experienced a significant increase in other revenues due to the sale of exchange memberships. The decrease in other revenue in the nine months May 31, 2006 reflect the lack of similar gains during the period and the termination of a profit sharing agreement with a customer.

Sales of commodities. Sales of commodities represents revenue generated from the sale of grain in the Grain Merchandising segment, the sale of fuel in the C&RM segment and the sale of various commodities in the Financial Services segment. The price of grain is volatile and is affected by various factors, including changes in the weather, economy and other factors affecting the supply and demand for grain. Although commodity sales generate a significant amount of our revenue, for management purposes we focus on the margin (gross profit)

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from commodity sales. The focus on gross profit from commodity sales removes the effect of commodity price driven changes on revenue and cost of goods sold, which may not have an effect on net income. The margin on commodity sales also provides a more meaningful comparison from period to period. The following table sets forth sales of commodities, commodities gross profit, grain bushels sold and fuel gallons sold for the three years ended August 31, 2005, and the nine months ended May 31, 2005 and 2006.

	Year Ended August 31,						Nine Months Ended May 31,
	2003		2004		2005		2005		2006
	($ in thousands)
Sales of commodities	$	1,164,334	$	1,536,209	$	1,290,620	$	1,028,876	$	860,678
Commodities gross profit	$	13,726	$	16,988	$	15,526	$	13,441	$	12,198
Grain bushels sold (millions)		247.9		257.9		258.0		201.3		180.6
Fuel gallons sold (millions)		100.6		104.4		18.2		15.1		2.4

Total revenues from the sale of commodities decreased at a compounded annual rate of 0.5% over the period from $1.2 billion in fiscal 2003, to $860.7 million in the nine months ended May 31, 2006. The sales volume of commodities underlying revenue from sales of commodities varied by the type of commodity. Fuel sales in our C&RM business declined at a 71.5% compound annual rate over the period, as we shifted our focus from handling physical fuels to only periodically participating as a principal in back-to-back ethanol transactions. We decided to exit the physical fuels business as the margins were inadequate. Grain volume sales over this period declined at a compound annual rate of 1.1%.

Costs and Expenses

Cost of commodities sold. Cost of commodities sold represents the product of the volume of purchased commodities and the cost of these commodities. Commodities purchased include grain in our Grain Merchandising segment, renewable fuels and gasoline in our C&RM segment and various commodities in our Financial Services segment. The price of commodities and volume sold are variable, and can be influenced by weather conditions and general economic, market and regulatory factors.

Employee compensation and commissions. Employee compensation and commissions consists of salaries, incentive compensation, commissions and bonuses and is one of our primary operating expenses. We classify employees as either risk management consultants or salaried and support personnel, which includes our executive officers. The most significant component of our compensation expense is the employment of our risk management consultants, who are compensated with commission based on the revenues that their customers generate. Accordingly, our commission expense component is variable and is dependent on our commissions revenue and service, consulting and brokerage fee revenue.

Pit brokerage and clearing fees. Pit brokerage and clearing fees relate directly to expenses for exchange-traded futures and options clearing and settlement services, including fees we pay to the exchanges and the floor pit brokers. These fees are variable and fluctuate based on transaction volume.

Introducing broker commissions. Introducing broker commissions are commissions that we pay to non-employee third parties that have introduced customers to us. Introducing brokers are individuals or organizations that maintain relationships with customers and accept futures and options orders from those customers. We directly provide all account, transaction and margining services to introducing brokers, including accepting money, securities and property from the customers. The commissions we pay an introducing broker varies based on a variety of factors, including on the trading volume of the customers introduced to our company. This expense is variable and is directly related to the overall volume of trades by those customers.

Employee benefits and payroll taxes expense. Employee benefits and payroll taxes expense consist primarily of employee health insurance, a defined benefit pension plan, a defined contribution 401K/ESOP plan, and

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payroll taxes. Accordingly, these expenses normally fluctuate in relation to employee compensation and commissions and the number of employees that we employ.

Interest expense. Interest expense consists of interest charged to us by our lenders on the loans, lines of credit and letters of credit outstanding. Our interest expense depends on the amount of debt outstanding and the interest rate environment, with all of our credit lines bearing interest at variable rates. Interest expense in our Grain Merchandising segment is affected by grain prices and the volume of bushels purchased and sold, as changes in these factors impact the amount of borrowings required to finance grain purchases and by the duration of sales transactions, which typically is longer for exported grain.

Depreciation and amortization. Depreciation and amortization expense arises from the depreciation of property, equipment and leasehold improvements. Beginning in fiscal 2005, depreciation within the Grain Merchandising segment increased significantly when grain bins at our Mobile, Alabama, port facility, recorded as a capital lease, were placed into service.

Bad debt expense. Bad debt expense consists of both amounts written off based on known defaults of customers and brokers, as well as an allowance for accounts that we believe may become uncollectible through our review of the historical aging of our receivables and our monitoring of the financial strength of our customers.

Other expenses. Other expenses consist primarily of office and equipment rent, communications, marketing information, travel, advertising, insurance, professional fees and other various expenses. The majority of these expenses are relatively fixed in nature and do not necessarily vary directly with changes in revenue.

Minority interest Minority interest reflects the 30% minority interest held by AGREX, Inc., a subsidiary of Mitsubishi Corporation, in FGDI LLC, the subsidiary that comprises our Grain Merchandising segment. Prior to March 31, 2006, minority interest also included a 30% interest held by an unaffiliated third party in FCStone Merchants Services, LLC.

Income tax expenses. Income tax expenses consist of current and deferred tax expense relating to federal, state and local taxes. We file a consolidated federal income tax return and combined state and local income tax returns for all wholly-owned subsidiaries.

Revenues, Net of Cost of Commodities Sold

Revenues, net of cost of commodities sold, consists of total revenues presented as determined in accordance with GAAP, less the cost of commodities sold. Revenues, net of cost of commodities sold, is a non-GAAP financial measure that is used in this prospectus because our management considers it an important supplemental measure of our performance. Management believes revenues, net of cost of commodities sold, is a more relevant measure of our economic interest in these commodities transactions because it removes the effect of commodity price driven changes in revenue and cost of commodities sold, which may not have a meaningful effect on net income. In managing our business, management has historically focused on revenues derived from sales of commodities, net of cost of commodities sold. This financial measure is meaningful in managing our business for several reasons. First, profit is driven more by the margin on commodities sold rather than the price of the commodities. Second, we generally establish the margin between the sales price and the cost at the time we enter into a transaction, eliminating the need to manage inventory cost. Lastly, analyzing consolidated costs and expenses as a percentage of total revenue is not meaningful because total revenues related to commodity sales is a disproportionately large number compared to margin. Measuring expense as a percentage of revenues, net of cost of commodities sold, provides a clearer understanding of the trends in costs and expenses and expense management.

Revenues, net of cost of commodities sold, have increased at a CAGR of approximately 30.9% over the period from $82.1 million in fiscal 2003, to $129.2 million in the nine months ended May 31, 2006, primarily due to increased exchange trading and OTC contract volume trading by our customers.

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Critical Accounting Policies and Estimates

Our consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America applied on a consistent basis. The preparation of these financial statements requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate these estimates and assumptions on an ongoing basis. We base these estimates on the information currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary materially from these estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made; if different estimates reasonably could have been used; or if changes in the estimate that are reasonably likely to occur periodically could materially impact the financial statements. We believe the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of our consolidated financial statements.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for trade receivables and deficits on customer commodity accounts. The allowances for doubtful accounts are significant estimates, and are maintained at a level considered appropriate by our management based on analyses of the historical aging of our receivables, credit quality for specific accounts, historical trends of charge-offs and recoveries, and current and projected economic, market and other conditions. If we become aware of a customer’s inability to meet its financial obligations, we establish a specific allowance for a potential bad debt expense to reduce the net recognized receivable to the amount we reasonably believe will be collected. Additionally, different assumptions, changes in economic circumstances or the deterioration of the financial condition of our customers could result in additional provisions to the allowances for doubtful accounts and increased bad debt expense. The valuation of the allowances for doubtful accounts is performed on a quarterly basis.

Inventories

Grain inventories are carried at net realizable value, which approximates market value. Estimates are used in determining the net realizable value of grain. These estimates include measurement of the quantity of grain in bins and other storage facilities, and involve considerations of the grading of the commodity and the basis adjustment for location and expected costs to sell. If estimates regarding reserves for inventory shrinkage, the grade of the commodity or the valuation of the basis adjustment are less favorable than management’s assumptions, then additional reserves or write-downs of inventories may be required.

Open Contracts and Hedge Policy—Grain

Open cash and futures contracts for the purchase and sale of grain are reported at market value and the resulting gains or losses are recognized currently in earnings. Market value includes a quoted exchange component and a basis component. The basis component represents a significant estimate, and is directly influenced by several factors, including transportation costs and local supply and demand conditions. If estimates regarding the valuation of the basis component are less favorable than management’s assumptions, then a write-down of open contract equity may be required. Additionally, we are exposed to risks that we may not have sufficient grain to deliver into our contracts and thus would be obligated to purchase grain at prevailing market rates in order to meet such commitments. We follow the policy of hedging our grain transactions through the use of those cash and futures contracts in order to minimize risk due to market fluctuations.

Pensions

We have noncontributory defined benefits pension plans for most of our employees. Our funding policy for the U.S. plans is to contribute amounts sufficient to meet the minimum funding requirement of the Employee

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Retirement Income Security Act of 1974, plus any additional amount we may deem to be appropriate. We account for our defined benefit pension plans in accordance with Statement of Financial Accounting Standards (SFAS) No. 87, “Employers’ Accounting for Pensions,” which requires that amounts recognized in financial statements be determined on an actuarial basis. A minimum liability is required to be established in the Consolidated Statements of Financial Condition representing the amount of unfunded accrued pension cost. This represents the difference between the accumulated benefit obligation, net of accrued pension liabilities and the fair value of plan assets and is recorded as a reduction to stockholders’ equity through accumulated other comprehensive income, net of tax, in the Consolidated Statements of Financial Condition. As of August 31, 2005, we have recorded an accumulated reduction to stockholders’ equity of approximately $4.6 million.

To account for our defined benefits pension plan in accordance with SFAS No. 87, we must make three main determinations at the end of each year: First, we must determine the actuarial assumptions for the discount rate used to reflect the time value of money in the calculation of the projected benefit obligations for the end of the current fiscal year and to determine the net periodic pension cost for the subsequent fiscal year. For guidance in determining the rate, we look at rates of return on high-quality fixed-income investments and periodic published rate ranges. See Note 7 to the Consolidated Financial Statements for a listing of the discount rates used.

Second, we must determine the actuarial assumption for rates of increase in compensation levels used in the calculation of the accumulated and projected benefit obligation for the end of the current fiscal year and to determine the net periodic pension cost for the subsequent fiscal year. The salary growth assumptions reflect our long-term actual experience, the near-term outlook and assumed inflation. Retirement and mortality rates are based primarily on actual plan experience and standard industry actuarial tables, respectively. See Note 7 to the Consolidated Financial Statements for a table showing the rates used.

Third, we must determine the expected long-term rate of return on assets assumption that is used to determine the expected return on plan assets component of the net periodic pension cost for the subsequent year. The expected returned on plan assets reflects asset allocation, investment strategy and the view of investment managers and other large pension plan sponsors. See the table in Note 7 to the Consolidated Financial Statements for the expected long-term rates used.

Income Taxes

We account for income taxes under SFAS 109, “Accounting for Income Taxes.” Under the standard, certain assumptions are made which represent significant estimates. These estimates are required because: (a) income tax returns are generally filed months after the close of our annual accounting period; (b) tax returns are subject to audit by taxing authorities and audits can often take years to complete and settle; and (c) future events often impact the timing of when we recognize income tax expenses and benefits. Our assumptions are supported by historical data and reasonable projections and are reviewed quarterly by management. We routinely evaluate all deferred tax assets to determine the likelihood of their realization. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. We have not recorded a valuation allowance as of May 31, 2006, August 31, 2005, and August 31, 2004, respectively.

Contingencies

As discussed in Note 14 to the consolidated financial statements (“Note 14”), certain legal proceedings are pending or threatened in various United States and foreign jurisdictions. We record provisions in the consolidated financial statements for pending litigation when it is determined that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. To the extent a range of potential outcomes is identified and no outcome is deemed more likely than another, we record our liability at the lower end of the range. Except as discussed in Note 14: (1) we have not concluded that it is probable that a loss has been incurred in any of the pending litigation; (2) we are unable to make a meaningful estimate of the amount or range of loss that could result from an unfavorable outcome of pending litigation; and (3) accordingly, we have not provided any amounts in the consolidated financial statements for unfavorable outcomes, if any.

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Results of Operations

Nine Months Ended May 31, 2006, Compared to Nine Months Ended May 31, 2005

Executive Summary

Net income increased $6.5 million, or 131.9%, from $4.9 million in the nine months ended May 31, 2005, to $11.4 million in the nine months ended May 31, 2006. This increase was primarily driven by higher exchange-traded and OTC contract trading volumes from new and existing customers, along with higher interest rates. The following chart provides revenues, costs and expenses, and net income for the period comparison.

	Nine Months Ended May 31, 2005				Nine Months Ended May 31, 2006					Variance
	In Thousands		% of Revenues, Net of Cost of Commodities Sold		In Thousands			% of Revenues, Net of Cost of Commodities Sold		In Thousands			% Change
Sales of commodities	$	1,028,876	N/M		$	860,678		N/M		$	(168,198	)	(16.3	)%
Cost of commodities sold		1,015,435	N/M			848,480		N/M			(166,955	)	(16.4	)%
Gross profit on commodities sold		13,441	14.7	%		12,198		9.4	%		(1,243	)	(9.2	)%
Commissions and clearing fees		54,840	59.9	%		74,635		57.8	%		19,795		36.1	%
Service, consulting and brokerage fees		13,244	14.5	%		24,598		19.0	%		11,354		85.7	%
Interest		5,269	5.8	%		15,277		11.8	%		10,008		189.9	%
Other revenues		4,720	5.2	%		2,480		1.9	%		(2,240	)	(47.5	)%
Revenues, net of cost of commodities sold(1)		91,514	100.0	%		129,188		100.0	%		37,674		41.2	%
Costs and expenses
Employee compensation and broker commissions		24,000	26.2	%		30,663		23.7	%		6,663		27.8	%
Pit brokerage and clearing fees		23,900	26.1	%		33,626		26.0	%		9,726		40.7	%
Introducing broker commissions		9,890	10.8	%		15,575		12.1	%		5,685		57.5	%
Employee benefits and payroll taxes		5,990	6.5	%		7,292		5.6	%		1,302		21.7	%
Interest expense		2,895	3.2	%		4,335		3.4	%		1,440		49.7	%
Depreciation and amortization		1,147	1.3	%		1,214		0.9	%		67		5.8	%
Bad debt expense		1,163	1.3	%		1,709		1.3	%		546		46.9	%
Other expenses		14,183	15.5	%		16,824		13.0	%		2,641		18.6	%
Total costs and expenses (excluding cost of commodities sold)		83,168	90.9	%		111,238		86.1	%		28,070		33.8	%
Income before income tax expense and minority interest		8,346	9.1	%		17,950		13.9	%		9,604		115.1	%
Minority interest		494	0.5	%		(370	)	(0.3	)%		(864	)	(174.9	)%
Income tax expense		2,950	3.2	%		6,950		5.4	%		4,000		135.6	%
Net income	$	4,902	5.4	%	$	11,370		8.8	%	$	6,468		131.9	%

(1) Revenues, net of cost of commodities sold, consists of total revenues presented with the sales of commodities net of cost of commodities sold. See “Selected and Other Data—Non-GAAP Financial Measures” for further discussion of revenues, net of cost of commodities sold.

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Revenues and Cost of Commodities Sold

Revenues, net of cost of commodities sold, increased $37.7 million, or 41.2%, from $91.5 million in the nine months ended May 31, 2005, to $129.2 million in the nine months ended May 31, 2006.

Sale of Commodities and Cost of Commodities Sold. Sales of commodities decreased by $168.2 million, or 16.3%, from $1,028.9 million in the nine months ended May 31, 2005, to $860.7 million in the nine months ended May 31, 2006. Cost of commodities sold decreased $166.9 million, or 16.4%, from $1,015.4 million in the nine months ended May 31, 2005, to $848.5 million in the nine months ended May 31, 2006. The decrease in sales and cost of commodities sold was due to a decrease in grain bushels handled, grain prices and physical fuel sales. Grain bushels handled decreased by 20.7 million bushels, or 10.3%, from 201.3 million bushels in the nine months ended May 31, 2005, to 180.6 million bushels in the nine months ended May 31, 2006. The decrease in bushels handled was the result of our decision to reduce purchases of grain for export due to less favorable market conditions, which resulted in a decline in export volume. The decrease in grain bushels handled accounted for $151.2 million of the decrease in sales and cost of commodities sold. In addition, grain prices declined and also resulted in lower sales and cost of commodities sold. Physical fuel sales declined 12.7 million gallons, or 81.4%, from 15.1 million gallons in the nine months ended May 31, 2005, to 2.4 million gallons in the nine months ended May 31, 2006. This decline resulted in a $19.7 million decrease in revenue from fuel sales and was due to our shift in focus from handling physical fuels to only periodically participating as a principal in back-to-back ethanol transactions. Gross profit on commodities sold decreased $1.2 million, or 9.2%, from $13.4 million in the nine months ended May 31, 2005, to $12.2 million in the nine months ended May 31, 2006.

Commissions and Clearing Fees. Commissions and clearing fees increased $19.8 million, or 36.1%, from $54.8 million in the nine months ended May 31, 2005, to $74.6 million in the nine months ended May 31, 2006. The increase was due to higher trading volume, which increased by 7.9 million exchange-traded contracts, or 29.7%, from 26.6 million contracts in the nine months ended May 31, 2005, to 34.5 million contracts in the nine months ended May 31, 2006. Revenues increased approximately in line with trading volume, as there was little change in the average revenue per trade during the period.

Service, Consulting and Brokerage Fees. Service, consulting and brokerage fees increased $11.4 million, or 85.7%, from $13.2 million in the nine months ended May 31, 2005, to $24.6 million in the nine months ended May 31, 2006. The revenue increase resulted primarily from an increase in OTC contract volume from our energy, renewable fuels, grain risk management and Latin America and China customers. OTC contract volume increased 76,357, or 60.8%, from 125,450 contracts in the nine months ended May 31, 2005, to 201,807 contracts in the nine months ended May 31, 2006.

Interest Income. Interest income increased $10.0 million, or 189.9%, from $5.3 million in the nine months ended May 31, 2005, to $15.3 million in the nine months ended May 31, 2006. The increase was primarily due to higher short-term interest rates, increased customer segregated assets and increased activity in the grain inventory financing program.

Other Revenues. Other revenues decreased by $2.2 million, or 47.5%, from $4.7 million in the nine months ended May 31, 2005, to $2.5 million in the nine months ended May 31, 2006. The decrease was primarily due to a gain of $0.9 million recognized in the nine months ended May 31, 2005 as a result of the termination of a shared profit agreement with a customer, a $0.8 million decrease in revenue earned as a profit share in a financing transaction through our subsidiary, FCStone Merchant Services, and a $0.6 million decrease in service revenues from shipping grain.

Other Costs and Expenses

Employee Compensation and Broker Commissions. Employee compensation and broker commissions increased $6.7 million, or 27.8%, from $24.0 million in the nine months ended May 31, 2005, to $30.7 million in

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the nine months ended May 31, 2006. This increase was primarily a result of a volume-related increase in broker commissions due to the higher revenues in our C&RM segment, and higher executive and staff incentive compensation due to higher net income.

Pit Brokerage and Clearing Fees. Pit brokerage and clearing fees increased $9.7 million, or 40.7% from $23.9 million in the nine months ended May 31, 2005, to $33.6 million in the nine months ended May 31, 2006. This increase was entirely related to increased volumes of traded and cleared contracts.

Introducing Broker Commissions. Introducing broker commissions increased $5.7 million, or 57.5%, from $9.9 million in the nine months ended May 31, 2005, to $15.6 million in the nine months ended May 31, 2006. The increase was due to higher contract trading volumes from customers introduced by our introducing brokers in the Clearing and Execution Services segment.

Employee Benefits and Payroll Taxes. Employee benefits and payroll taxes increased $1.3 million, or 21.7%, from $6.0 million in the nine months ended May 31, 2005, to $7.3 million in the nine months ended May 31, 2006. This increase was primarily related to higher employee compensation and broker commissions, and increased pension plan costs.

Interest. Interest expense increased $1.4 million, or 49.7%, from $2.9 million in the nine months ended May 31, 2005, to $4.3 million in the nine months ended May 31, 2006. This increase was due primarily to higher short-term interest rates and higher borrowings as a result of increased activity in the grain inventory financing program and in our grain merchandising operations.

Depreciation and Amortization. Depreciation and amortization increased $67,000, or 5.8%, from $1.1 million in the nine months ended May 31, 2005, to $1.2 million in the nine months ended May 31, 2006.

Bad Debt Expense. Bad debt expense increased $0.5 million, or 46.9%, from $1.2 million in the nine months ended May 31, 2005, to $1.7 million in the nine months ended May 31, 2006. This increase was primarily due to the bankruptcy of a customer in our Grain Merchandising segment.

Other Expenses. Other expenses increased $2.6 million, or 18.6%, from $14.2 million in the nine months ended May 31, 2005, to $16.8 million in the nine months ended May 31, 2006. This additional expense was due to increases in other expenses, including increases in marketing expenses and technology to support our business.

Income Tax Expense. Our provision for income taxes increased $4.0 million, or 135.6%, from $3.0 million in the nine months ended May 31, 2005, to $7.0 million in the nine months ended May 31, 2006. The increase was due to higher profitability, as our effective income tax rate remained relatively constant at 37.9% in the nine months ended May 31, 2006, compared to 37.6% for the nine months ended May 31, 2005.

Year Ended August 31, 2005, Compared to Year Ended August 31, 2004

Executive Summary

Net income increased $0.2 million, or 2.6%, from $6.4 million in fiscal 2004, to $6.6 million in fiscal 2005. Although our net income increased modestly during the period, our revenues, net of cost of commodities, increased $21.7 million, or 20.6%, in fiscal 2005 compared to fiscal 2004. The increase in revenue, net of commodities sold, resulted from higher short-term interest rates, increased customer segregated assets, higher exchange-traded and OTC contract trading volume, and the gain of $1.8 million on the sale of a Chicago Board of Trade (“CBOT”) seat. Net income growth did not match the growth in revenues, net of commodities sold, due primarily to an increase in bad debt expense and a higher effective income tax rate. In fiscal 2005 we recorded a bad debt expense of $3.4 million related to the write-off of two international grain merchandising-related receivables. We also experienced a higher effective income tax rate due to our restructuring in fiscal 2005 and

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our no longer being able to use the patronage dividend deduction, which is a tax deduction for all patronage dividends distributed to cooperative members. The following chart provides revenues, costs and expenses, and net income for the period comparison.

	Year Ended August 31, 2004				Year Ended August 31, 2005					Variance
	In Thousands		% of Revenues, Net of Cost of Commodities Sold		In Thousands			% of Revenues, Net of Cost of Commodities Sold		In Thousands			% Change
Sales of commodities	$	1,536,209	N/M		$	1,290,620		N/M		$	(245,589	)	(16.0	)%
Cost of commodities sold		1,519,221	N/M			1,275,094		N/M			(244,127	)	(16.1	)%
Gross profit on commodities sold		16,988	16.2	%		15,526		12.2	%		(1,462	)	(8.6	)%
Commissions and clearing fees		67,594	64.3	%		76,674		60.5	%		9,080		13.4	%
Service, consulting and brokerage fees		12,008	11.4	%		18,913		14.9	%		6,905		57.5	%
Interest		3,982	3.8	%		8,177		6.5	%		4,195		105.3	%
Other revenues		4,521	4.3	%		7,463		5.9	%		2,942		65.1	%
Revenues, net of cost of commodities sold		105,093	100.0	%		126,753		100.0	%		21,660		20.6	%
Costs and expenses
Employee compensation and broker commissions		30,160	28.7	%		32,578		25.7	%		2,418		8.0	%
Pit brokerage and clearing fees		26,713	25.4	%		33,141		26.1	%		6,428		24.1	%
Introducing broker commissions		10,704	10.2	%		14,459		11.4	%		3,755		35.1	%
Employee benefits and payroll taxes		7,136	6.8	%		8,044		6.3	%		908		12.7	%
Interest		4,418	4.2	%		3,946		3.1	%		(472	)	(10.7	)%
Depreciation and amortization		861	0.8	%		1,551		1.2	%		690		80.1	%
Bad debt expense		716	0.7	%		4,077		3.2	%		3,361		469.4	%
Other expenses		15,365	14.6	%		18,926		14.9	%		3,561		23.2	%
Total costs and expenses (excluding cost of commodities sold)		96,073	91.4	%		116,722		92.1	%		20,649		21.5	%
Income before income tax expense and minority interest		9,020	8.6	%		10,031		7.9	%		1,011		11.2	%
Minority interest		576	0.5	%		(499	)	(0.4	)%		(1,075	)	(186.6	)%
Income tax expense		2,030	1.9	%		3,950		3.1	%		1,920		94.6	%
Net income	$	6,414	6.1	%	$	6,580		5.2	%	$	166		2.6	%

Revenues and Cost of Commodities Sold

Revenues, net of cost of commodities sold, increased $21.7 million, or 20.6%, from $105.1 million in fiscal 2004, to $126.8 million in fiscal 2005.

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Sale of Commodities and Cost of Commodities Sold. Sales of commodities decreased by $245.6 million, or 16.0%, from $1,536.2 million in fiscal 2004, to $1,290.6 million in fiscal 2005. Cost of commodities sold decreased $244.1 million, or 16.1%, from $1,519.2 million in fiscal 2004, to $1,275.1 million in fiscal 2005. These decreases were primarily a result of lower grain prices, as bushels merchandised remained constant at 258 million bushels. Fuel sales declined $81.5 million, or 73.0%, from $111.7 million in fiscal 2004, to $30.2 million in fiscal 2005. Fuel purchases decreased by $80.6 million, or 72.7%, from $110.9 million in fiscal 2004, to $30.3 million in fiscal 2005. Fuel sales and purchases declined as we shifted our focus from handling physical fuels to only periodically participating as a principal in back-to-back ethanol transactions. Gross profit on commodities sold decreased $1.5 million, or 8.6%, from $17.0 million in fiscal 2004, to $15.5 million in fiscal 2005.

Commissions and Clearing Fees. Commissions and clearing fees increased $9.1 million, or 13.4%, from $67.6 million in fiscal 2004, to $76.7 million in fiscal 2005. The increase in revenue resulted from a 6.3 million contract, or 21.1%, increase in futures trading volume from 29.9 million contracts in fiscal 2004, to 36.2 million contracts in fiscal 2005, driven by high energy commodities price volatility and the resulting increased trading activity. This increase in trading volume was offset by a decline in the average rate per contract. The decline in overall average rate per contract was due to growth in the lower-margin Clearing and Execution Services segment and the increasing proportion of our revenues that this segment accounted for during this period.

Service, Consulting and Brokerage Fees. Service, consulting and brokerage fees increased $6.9 million, or 57.5%, from $12.0 million in fiscal 2004, to $18.9 million in fiscal 2005. This increase was primarily due to increased OTC brokerage fees from energy and commercial grain customers. OTC contract volume increased 90,147 contracts, or 143.5%, from 62,810 contracts in fiscal 2004, to 152,957 contracts in fiscal 2005. In addition, we experienced an increase in consulting fees due to more customers and higher average fees in the IRMP.

Interest Income. Interest income increased $4.2 million, or 105.3%, from $4.0 million in fiscal 2004, to $8.2 million in fiscal 2005. The increase was primarily due to higher short-term interest rates and increased customer segregated assets.

Other Revenues. Other revenues increased by $2.9 million, or 65.1%, from $4.5 million in fiscal 2004, to $7.5 million in fiscal 2005. The increase was primarily due to the gain on the sale of a CBOT seat of $1.8 million. In addition, we realized $1.0 million of revenues earned as a profit share in a financing transaction through our subsidiary, FCStone Merchant Services.

Other Costs and Expenses

Employee Compensation and Broker Commissions. Employee compensation and broker commissions increased $2.4 million, or 8.0%, from $30.2 million in fiscal 2004, to $32.6 million in fiscal 2005. This volume-related increase was primarily due to increased broker commissions from our C&RM segment and additional personnel in our Clearing and Execution Services and Financial Services segments.

Pit Brokerage and Clearing Fees. Pit brokerage and clearing fees increased $6.4 million, or 24.1%, from $26.7 million in fiscal 2004, to $33.1 million in fiscal 2005. This increase was directly related to increased volume of traded and cleared contracts.

Introducing Broker Commissions. Introducing broker commissions increased $3.8 million, or 35.1%, from $10.7 million in fiscal 2004, to $14.5 million in fiscal 2005. The increase was primarily a result of the volume-related increase in commissions due to higher commission & clearing revenue.

Employee Benefits and Payroll Taxes. Employee benefits and payroll taxes increased $0.9 million, or 12.7%, from $7.1 million in fiscal 2004, to $8.0 million in fiscal 2005, primarily due to rate increases in our pension and medical insurance plans.

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Interest Expense. Interest expense decreased $0.5 million, or 10.7%, from $4.4 million in fiscal 2004, to $3.9 million in fiscal 2005. The decrease was primarily due to lower grain prices and our decision to reduce export-related grain bushels in our Grain Merchandising segment. This reduced the amount and duration of grain financing. Our lower average borrowings were partially offset by higher short-term interest rates.

Depreciation and Amortization. Depreciation and amortization increased $0.7 million, or 80.1%, from $0.9 million in fiscal 2004, to $1.6 million in fiscal 2005. This increase was primarily due to grain bins at our Mobile, Alabama, port facility, recorded as a capital lease, being placed into service.

Bad Debt Expense. Bad debt expense increased $3.4 million, or 469.4%, from $0.7 million in fiscal 2004, to $4.1 million in fiscal 2005. The increase was primarily due to bad debt expenses associated with two large international customers in our Grain Merchandising segment.

Other Expenses. Other expenses increased $3.6 million, or 23.2%, from $15.4 million in fiscal 2004, to $18.9 million in fiscal 2005. This increase resulted primarily from higher legal and professional fees of $1.7 million incurred in connection with our restructuring and with managing ongoing claims in our Grain Merchandising segment.

Income Tax Expense. Our provision for income taxes increased $2.0 million, or 94.6%, from $2.0 million in fiscal 2004, to $4.0 million in fiscal 2005. This increase was due primarily to our restructuring in fiscal 2005, which resulted in our no longer being taxed as a cooperative and therefore not being eligible to use a patronage dividend deduction. As a result, the effective income tax rate increased from 24.0% in fiscal 2004, to 37.5% in fiscal 2005.

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Year Ended August 31, 2004, Compared to Year Ended August 31, 2003

Executive Summary

Net income increased $2.1 million, or 49.0%, from $4.3 million in fiscal 2003, to $6.4 million in fiscal 2004. This increase was primarily due to higher exchange-traded and OTC contract volumes. Exchange-traded and OTC trading volume growth was driven by strong trading increases in our energy business, which was due to an increase in energy price volatility, and increased trading with our commercial grain customers. The following chart provides revenues, costs and expenses, and net income for the period comparison.

	Year Ended August 31, 2003				Year Ended August 31, 2004				Variance
	In Thousands		% of Revenues, Net of Cost of Commodities Sold		In Thousands		% of Revenues, Net of Cost of Commodities Sold		In Thousands			% Change
Sales of commodities	$	1,164,334	N/M		$	1,536,209	N/M		$	371,875		31.9	%
Cost of commodities sold		1,150,608	N/M			1,519,221	N/M			368,613		32.0	%
Gross profit on commodities sold		13,726	16.7	%		16,988	16.2	%		3,262		23.8	%
Commissions and clearing fees		48,947	59.6	%		67,594	64.3	%		18,647		38.1	%
Service, consulting and brokerage fees		10,566	12.9	%		12,008	11.4	%		1,442		13.6	%
Interest		4,610	5.6	%		3,982	3.8	%		(628	)	(13.6	)%
Other revenues		4,299	5.2	%		4,521	4.3	%		222		5.2	%
Revenues, net of cost of commodities sold		82,148	100.0	%		105,093	100.0	%		22,945		27.9	%
Costs and expenses
Employee compensation and broker commissions		25,955	31.6	%		30,160	28.7	%		4,205		16.2	%
Pit brokerage and clearing fees		16,382	19.9	%		26,713	25.4	%		10,331		63.1	%
Introducing broker commissions		8,551	10.4	%		10,704	10.2	%		2,153		25.2	%
Employee benefits and payroll taxes		5,971	7.3	%		7,136	6.8	%		1,165		19.5	%
Interest expense		3,040	3.7	%		4,418	4.2	%		1,378		45.3	%
Depreciation and amortization		837	1.0	%		861	0.8	%		24		2.9	%
Bad debt expense		76	0.1	%		716	0.7	%		640		842.1	%
Other expenses		15,270	18.6	%		15,365	14.6	%		95		0.6	%
Total costs and expenses (excluding cost of commodities sold)		76,082	92.6	%		96,073	91.4	%		19,991		26.3	%
Income before income tax expense and minority interest		6,066	7.4	%		9,020	8.6	%		2,954		48.7	%
Minority interest		561	0.7	%		576	0.5	%		15		2.7	%
Income tax expense		1,200	1.5	%		2,030	1.9	%		830		69.2	%
Net income	$	4,305	5.2	%	$	6,414	6.1	%	$	2,109		49.0	%

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Revenues and Cost of Commodities Sold

Revenue, net of cost of commodities sold, increased $22.9 million, or 27.9%, from $82.1 million in fiscal 2003, to $105.1 million in fiscal 2004.

Sale of Commodities and Cost of Commodities Sold. Sales of commodities increased by $371.9 million, or 31.9%, from $1,164.3 million in fiscal 2003, to $1,536.2 million in fiscal 2004. Cost of commodities sold increased $368.6 million, or 32.0%, from $1,150.6 million in fiscal 2003, to $1,519.2 million in fiscal 2004. Both the increase in sales and costs of commodities sold resulted from both an increase in the average price of grain, and the number of grain bushels sold and an increase in fuel sales. Bushels sold increased 10 million, or 4.0%, from 248 million in fiscal 2003, to 258 million in fiscal 2004. Fuel sales increased $40.7 million, or 57.1%, from $71.1 million in fiscal 2003, to $111.7 million in fiscal 2004. Gross profit on commodities sold increased $3.3 million, or 23.8%, from $13.7 million in fiscal 2003, to $17.0 million in fiscal 2004.

Commissions and Clearing Fees. Commissions and clearing fees increased $18.6 million, or 38.1%, from $48.9 million in fiscal 2003, to $67.6 million in fiscal 2004. The increase was primarily due to a contract volume increase of 13.6 million, or 83.4%, from 16.3 million contracts in fiscal 2003, to 29.9 million contracts in fiscal 2004. This increase was primarily due to higher energy-related contract trading volume. Offsetting this volume increase was a decline in average rate per contract due to strong growth in our lower-margin Clearing and Execution Services segment and its growing proportion of our commission and clearing fee revenue.

Service, Consulting and Brokerage Fees. Service, consulting and brokerage fees increased $1.4 million, or 13.6%, from $10.6 million in fiscal 2003, to $12.0 million in fiscal 2004. The increase was primarily due to increased OTC trading fees from energy and commercial grain customers and additional IRMP customers’ fees. OTC contract volumes increased 8,630 contracts, or 16.0%, from 54,180 contracts in fiscal 2003, to 62,810 contracts in fiscal 2004.

Interest Income. Interest income decreased $0.6 million, or 13.6%, from $4.6 million in fiscal 2003, to $4.0 million in fiscal 2004. The decrease was primarily due to lower average short-term interest rates, which were partially offset by an increase in customer segregated assets.

Other Revenues. Other revenues increased by $0.2 million, or 5.2% from $4.3 million in fiscal 2003, to $4.5 million in fiscal 2004. The increase was primarily due to the gain on the sale of Board of Trade Clearing Corporation stock of $0.8 million.

Other Costs and Expenses

Employee Compensation and Broker Commissions. Employee compensation and broker commissions increased $4.2 million, or 16.2%, from $26.0 million in fiscal 2003, to $30.2 million in fiscal 2004. This volume-related increase was primarily due to increased broker commissions from our increase in trading revenue, and to additional personnel in our Clearing and Execution Services and Financial Services segments.

Pit Brokerage and Clearing Fees. Pit brokerage and clearing fees increased $10.3 million, or 63.1%, from $16.4 million in fiscal 2003, to $26.7 million in fiscal 2004. This increase was directly related to higher volume-related commissions and clearing fee revenues. Additionally, a portion of the increase in pit brokerage and clearing fees was related to increased volumes of traded and cleared contracts.

Introducing Broker Commissions. Introducing broker commissions increased $2.2 million, or 25.2%, from $8.6 million in fiscal 2003, to $10.7 million in fiscal 2004. This increase was due to higher commissions and clearing fee revenues from the customers originated through introducing brokers in fiscal 2004.

Employee Benefits and Payroll Taxes. Employee benefits and payroll taxes increased $1.2 million, or 19.5%, from $6.0 million in fiscal 2003, to $7.1 million in fiscal 2004, primarily due to rate increases in our pension and medical insurance plans.

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Interest Expense. Interest expense increased $1.4 million, or 45.3%, from $3.0 million in fiscal 2003, to $4.4 million in fiscal 2004. This increase was due to higher borrowings caused by an increase in bushels handled in our Grain Merchandising segment, an increase in export-related bushels and higher grain prices.

Depreciation and Amortization. Depreciation and amortization remained constant at $0.8 million and $0.9 million in fiscal 2003 and 2004, respectively.

Bad Debt Expense. Bad debt expense increased $0.6 million from $0.1 million in fiscal 2003, to $0.7 million in fiscal 2004. The increase was primarily due to additions to the allowance for doubtful accounts because of credit quality issues relating to a customer in our Grain Merchandising segment.

Other Expenses. Other expenses increased $0.1 million, or 0.6%, from $15.3 million in fiscal 2003, to $15.4 million in fiscal 2004. This increase was due to higher employee travel-related expenses of $0.4 million, offset by a reduction in other expenses of $0.6 million resulting from subrogation payments for legal expenses incurred in previous years in connection with legal proceedings.

Income Tax Expense. Our provision for income taxes increased $0.8 million, or 69.2%, from $1.2 million in fiscal 2003, to $2.0 million in fiscal 2004. This increase was due to both an increase in total earnings and, in particular, an increase in our earnings from our nonmember business while we were a cooperative, which was taxed at a higher rate. As a result, the effective income tax rate increased from 21.8% in fiscal 2003, to 24.0% in fiscal 2004.

Operations by Segment

Our reportable operating segments consist of C&RM, Clearing and Execution Services, Financial Services and Grain Merchandising. We include the earnings of equity affiliates that are closely associated with our operating segments in the respective segment’s net income. Revenues, expenses and equity earnings from equity affiliates that are not easily identified with one of our four operating segments are reported in the Corporate and Other segment. Segment income (loss) before minority interest and income taxes is defined as total segment revenues less total segment costs and expenses before reconciling amounts, corporate expenses, minority interest and income taxes. Reconciling amounts represent the elimination of interest income and expense and commission income and expense between segments. Such transactions are conducted at market prices to more accurately evaluate the profitability of the individual business segments. A reconciliation of total segment revenues and segment income before minority interest and income taxes to the Consolidated Statements of Operations is included in Note 18 for the three fiscal years ended August 31, 2005, and Note 5 for the nine months ended May 31, 2005, and 2006.

We prepared the financial results for our operating segments on a basis that is consistent with the manner in which we internally prepare financial information to assist in making internal operating decisions. We have allocated certain common expenses among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. Segment income before income taxes may not be consistent with measures used by other companies. The accounting policies of our operating segments are the same as those applied in the consolidated financial statements. Certain amounts in the fiscal year 2003, 2004 and 2005 consolidated financial statements have been reclassified. Revenues generated from ocean vessel dockage and related income in our Grain Merchandising segment have been reclassified to other income from sales of commodities. Expenses related to the dock facility in our Grain Merchandising segment have been reclassified to certain expense lines. These reclassifications are not significant and are intended to reflect in revenues and costs associated with grain merchandising that represent the purchases and delivery of grain, excluding revenues and expenses that are ancillary to those operations.

Commodity and Risk Management Services

Our C&RM segment offers risk management consulting and access to the commodity derivative markets with the objective of helping our customers mitigate commodity price risk and optimize their profit margins. In

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this segment, we generate revenues from six primary sources: (1) commission and clearing fee revenues from exchange-traded futures and options contracts, (2) brokerage fees from OTC transactions, (3) interest income derived from cash balances in our customers’ accounts, (4) risk management service and consulting fees, (5) fuel sales and (6) other revenues. Our customers in this segment consist of middle-market commodity intermediaries, end-users and producers, focused primarily in the areas of domestic and international grain, renewable fuels and energy. In fiscal 2005, this segment represented approximately 75% of our consolidated income before minority interest, income tax and corporate overhead. The principal factors that affect our financial performance in this segment include:

• the level of volatility in commodity prices,

• the level of knowledge and sophistication of our customers with respect to commodity risk,

• the development of new risk management products for our customers

• the volume of commodities produced and consumed by our customers, and

• the level of short-term interest rates and the amount of cash balances in our customers’ accounts.

The following table provides the financial performance for this segment.

	Year Ended August 31,							Nine Months Ended May 31,
	2003		2004		2005			2005			2006
					(in thousands)
Sales of commodities	$	71,135	$	111,661	$	30,179		$	24,872		$	5,197
Cost of commodities sold		70,034		110,840		30,279			24,906			5,113
Gross profit on commodities sold		1,101		821		(100	)		(34	)		84
Commissions and clearing fees		24,056		29,173		28,879			20,606			24,852
Service, consulting and brokerage fees		11,162		12,716		19,610			13,719			25,051
Interest		2,104		1,345		3,131			1,902			6,087
Other revenues		370		1,227		1,914			244			83
Revenues, net of cost of commodities sold		38,793		45,282		53,434			36,437			56,157
Costs and expenses:
Expenses (excluding interest expense)		32,004		37,261		42,201			30,326			40,339
Interest expense		113		114		73			44			87
Total costs and expenses (excluding cost of commodities sold)		32,117		37,375		42,274			30,370			40,426
Segment income before minority interest and income taxes	$	6,676	$	7,907	$	11,160		$	6,067		$	15,731

Nine Months Ended May 31, 2006, Compared to Nine Months Ended May 31, 2005

Sales of commodities decreased $19.7 million, or 79.1%, from $24.9 million in the nine months ended May 31, 2005, to $5.2 million in the nine months ended May 31, 2006. The cost of commodities sold decreased $19.8 million, or 79.5%, from $24.9 million in the nine months ended May 31, 2005, to $5.1 million in the nine months ended May 31, 2006. The decrease in sales of commodities and cost of commodities sold was due to a decrease in the volume sold, as we shifted our focus from handling physical fuels to only periodically participating as a principal in back-to-back ethanol transactions.

Service, consulting and brokerage fees increased $11.3 million, or 82.6%, from $13.7 million in the nine months ended May 31, 2005, to $25.1 million in the nine months ended May 31, 2006. This increase was primarily due to a significant increase in OTC brokerage volume from renewable fuels and commercial grain customers. Commissions and clearing fee revenues increased $4.2 million, or 20.6%, from $20.6 million in the

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nine months ended May 31, 2005, to $24.9 million in the nine months ended May 31, 2006. This increase in commissions and clearing fees was due to higher grain commodity price volatility and a larger Fall 2005 grain crop. This resulted in a 0.4 million contract, or 33.3%, increase in trading volume for exchange-traded contracts from 1.2 million contracts in the nine months ended May 31, 2005, to 1.6 million contracts in the nine months ended May 31, 2006. Offsetting this increase in trading volume was a decline in the average rate per trade, which declined from $16.96 to $15.74. Interest income increased $4.2 million, or 220.0%, from $1.9 million in the nine months ended May 31, 2005, to $6.1 million in the nine months ended May 31, 2006, which was due to higher short-term interest rates and an increase in customer segregated assets.

Revenues, net of cost of commodities sold, increased $19.8 million, or 54.4%, from $36.4 million in the nine months ended May 31, 2005, to $56.2 million in the nine months ended May 31, 2006.

Expenses, excluding interest expense, increased $10.0 million, or 33.0%, from $30.3 million in the nine months ended May 31, 2005, to $40.3 million in the nine months ended May 31, 2006. The expense increase was primarily due to a $7.3 million increase in employee compensation and broker commissions and related benefits, a $1.4 million increase in pit brokerage and clearing fees, and a $1.1 million increase in introducing broker commissions. Employee compensation and broker commissions increased primarily due to higher commission and clearing revenues and higher executive and staff incentive compensation due to higher net income in the nine months ended May 31, 2006, compared to the nine months ended May 31, 2005.

Year Ended August 31, 2005, Compared to Year Ended August 31, 2004

Sales of commodities decreased $81.5 million, or 73.0%, from $111.7 million in fiscal 2004, to $30.2 million in fiscal 2005. Costs of commodities sold decreased by $80.5 million, or 72.7%, from $110.8 million in fiscal 2004, to $30.3 million in fiscal 2005. These declines were due to our shifting away from handling physical fuels to only periodically participating as a principal in back-to-back ethanol transactions.

Service, consulting and brokerage fees increased $6.9 million, or 54.2%, from $12.7 million in fiscal 2004, to $19.6 million in fiscal 2005. This increase was primarily due to increased energy and grain OTC brokerage fees and, to a lesser extent, additional customers in the IRMP. Commissions and clearing fee revenues decreased slightly from $29.2 million in fiscal 2004, to $28.9 million in fiscal 2005, due to a relatively flat trading volume and a slightly lower average rate per contract. Interest income increased $1.8 million, or 132.8%, from $1.3 million in fiscal 2004, to $3.1 million in fiscal 2005, primarily due to higher short-term interest rates and increases customer segregated assets. Other revenues increased $0.7 million, or 56.0%, from $1.2 million in fiscal 2004, to $1.9 million in fiscal 2005. Other revenues included a $0.8 million gain on the sale of Board of Trade Clearing Corporation stock in fiscal 2004 and a gain of $1.8 million from the sale of a CBOT seat in fiscal 2005.

Revenues, net of cost of commodities sold, increased $8.2 million, or 18.0%, from $45.3 million in fiscal 2004, to $53.4 million in fiscal 2005.

Expenses, excluding interest expense, increased $4.9 million, or 13.3%, from $37.3 million in fiscal 2004, to $42.2 million in fiscal 2005. The expense increase was primarily due to volume-related revenue growth, which caused an increase in employee compensation and commissions, related employee benefits and introducing broker commissions and the addition of several risk management consultants. Interest expense decreased $41,000, or 36.0%, from $114,000 in fiscal 2004, to $73,000 in fiscal 2005.

Year Ended August 31, 2004, Compared to Year Ended August 31, 2003

Sales of commodities increased $40.5 million, or 57.0%, from $71.1 million in fiscal 2003, to $111.7 million in fiscal 2004. Cost of commodities sold increased $40.8 million, or 58.3%, from $70.0 million in fiscal 2003, to $110.8 million in fiscal 2004. These increases in sales and costs of commodities sold were primarily due to higher fuel prices.

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Commissions and clearing fees increased $5.1 million, or 21.3%, from $24.1 million in fiscal 2003, to $29.2 million in fiscal 2004. This increase was primarily due to increased trading volumes driven by higher grain commodity price volatility in fiscal 2004. Service, consulting and brokerage fees increased $1.6 million, or 13.9%, from $11.2 million in fiscal 2003, to $12.7 million in fiscal 2004. This increase was primarily due to increased energy and grain risk management brokerage services and higher fees from our IRMP customers. Other revenue increased $0.9 million from $0.4 million in fiscal 2003, to $1.2 million in fiscal 2004. This increase in other revenue was primarily due to an increase in the gain on the sale of Board of Trade Clearing Corporation stock from $0.3 million in fiscal 2003, to $0.8 million in fiscal 2004. Interest income decreased $0.8 million, or 36.1%, from $2.1 million in fiscal 2003, to $1.3 million in fiscal 2004, primarily due to lower short-term interest rates.

Revenues, net of cost of commodities sold, increased $6.5 million, or 16.7%, from $38.8 million in fiscal 2003, to $45.3 million in fiscal 2004.

Expenses, excluding interest expense, increased $5.3 million, or 16.4%, from $32.0 million in fiscal 2003, to $37.3 million in fiscal 2004. This increase was primarily due to a volume-related increase in revenue that caused an increase in employee compensation and commissions and related employee benefits of $3.5 million and a volume-related increase in pit brokerage and introducing broker commissions of $1.9 million. Interest expense remained relatively unchanged.

Clearing and Execution Services

The Clearing and Execution Services segment offers low-cost clearing and execution for exchange-traded futures and options to the wholesale and professional trader market segments. In this segment, we generate revenues from two primary sources: commissions and clearing fee revenues from the execution and clearing of exchange-traded futures and options contracts, and interest income derived from cash balances in our customers’ accounts. In fiscal 2005, this segment represented approximately 35% of our consolidated income before minority interest, income tax and corporate overhead. The principal factors that affect our financial performance in this segment include:

• the level of volatility in commodity prices, and

• the level of short-term interest rates and the amount of cash balances in our customers’ accounts.

The following table provides the financial performance for this segment.

	Year Ended August 31,						Nine Months Ended May 31,
	2003		2004		2005		2005		2006
	(dollars in thousands)
Sales of commodities	$	—	$	—	$	—	$	—	$	—
Cost of commodities sold		—		—		—		—		—
Gross profit on commodities sold		—		—		—		—		—
Commissions and clearing fees		25,576		39,072		48,332		34,630		50,151
Service, consulting and brokerage fees		—		—		—		—		—
Interest		1,304		1,412		4,124		2,717		7,234
Other revenues		—		—		921		921		—
Revenues, net of cost of commodities sold		26,880		40,484		53,377		38,268		57,385
Costs and expenses:
Expenses (excluding interest expense)		25,896		36,932		47,888		34,263		48,651
Interest expense		37		193		337		218		251
Total costs and expenses (excluding cost of commodities sold)		25,933		37,125		48,225		34,481		48,902
Segment income before minority interest and income taxes	$	947	$	3,359	$	5,152	$	3,787	$	8,483

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Nine Months Ended May 31, 2006, Compared to Nine Months Ended May 31, 2005

Commissions and clearing fees increased $15.5 million, or 44.8%, from $34.6 million in the nine months ended May 31, 2005, to $50.2 million in the nine months ended May 31, 2006. This increase was the result of increased trading volume in energy and metals commodities due primarily to higher price volatility. Interest income increased $4.5 million, or 166.2%, from $2.7 million in the nine months ended May 31, 2005, to $7.2 million in the nine months ended May 31, 2006, primarily due to higher short-term interest rates and increased customer segregated assets. Other revenue decreased $0.9 million, or 100%, from $0.9 million in the nine months ended May 31, 2005, to $0.0 million in the nine months ended May 31, 2006. This decrease was primarily due to a gain from the termination of a shared profit agreement with a customer, which was reflected in the results for the nine months ended May 31, 2005.

Revenues, net of cost of commodities sold, increased $19.1 million, or 50.0%, from $38.3 million in the nine months ended May 31, 2005, to $57.4 million in the nine months ended May 31, 2006. The primary reason for the increase in revenues, net of cost of commodities sold, was the increase in contract trading volume of 7.5 million contracts, or 29.5%, from 25.4 million contracts in the nine months ended May 31, 2005, to 32.9 million contracts in the nine months ended May 31, 2006.

Expenses, excluding interest expense, increased $14.4 million, or 42.0%, from $34.3 million in the nine months ended May 31, 2005, to $48.7 million in the nine months ended May 31, 2006. This increase in expenses was primarily due to volume-related increases in clearing fees of $9.0 million, increased pit brokerage expenses of $0.5 million, higher introducing broker commissions of $3.8 million and related increased employee compensation of $0.8 million. Interest expense increased $33,000, or 15.1%, from $0.2 million in the nine months ended May 31, 2005, to $0.3 million in the nine months ended May 31, 2006.

Year Ended August 31, 2005, Compared to Year Ended August 31, 2004

Commissions and clearing fees increased $9.3 million, or 23.7%, from $39.1 million in fiscal 2004, to $48.3 million in fiscal 2005. This increase was the result of increased trading volume. Interest income increased $2.7 million, or 192.1%, from $1.4 million in fiscal 2004, to $4.1 million in fiscal 2005, primarily due to increased short-term interest rates and a higher level of customer segregated assets. Other income increased $0.9 million to $0.9 million in fiscal 2005, due to a gain from the termination of a shared-profit agreement with a customer in fiscal 2005.

Revenues, net of cost of commodities sold, increased $12.9 million, or 31.8%, from $40.5 million in fiscal 2004, to $53.4 million in fiscal 2005. With the increase in prices for energy and metals commodities in fiscal 2005, our customers’ trading volume increased over fiscal 2004. Total trade volume increased 6.3 million contracts, or 22.3%, from 28.2 million contracts in fiscal 2004, to 34.5 million contracts in fiscal 2005.

Expenses, excluding interest expense, increased $11.0 million, or 29.7%, from $36.9 million in fiscal 2004, to $47.9 million in fiscal 2005. This increase was primarily due to volume-related increases in pit brokerage and clearing fees of $7.5 million, higher introducing broker commissions of $2.1 million and increased salaries and wages and benefits of $0.9 million. Interest expense increased $0.1 million, or 74.6%, from $0.2 million in fiscal 2004, to $0.3 million in fiscal 2005.

Year Ended August 31, 2004, Compared to Year Ended August 31, 2003

Commissions and clearing fees increased $13.5 million, or 52.8%, from $25.6 million in fiscal 2003, to $39.1 million in fiscal 2004, due to higher trading volumes. Interest income increased $0.1 million, or 8.3%, from $1.3 million in fiscal 2003, to $1.4 million in fiscal 2004. This increase was primarily due to higher customer segregated assets, but was offset by lower short-term interest rates.

Revenues, net of cost of commodities sold, increased $13.6 million, or 50.6%, from $26.9 million in fiscal 2003, to $40.5 million in fiscal 2004. With the increase in price volatility of energy and metals commodities in fiscal 2004, our customers’ trading volume increased substantially over fiscal 2003. Total trade volume increased by 13.3 million contracts, or 89.3%, from 14.9 million contracts in fiscal 2003, to 28.2 million contracts in fiscal 2004.

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Expenses, excluding interest expense, increased $11.0 million, or 42.6%, from $25.9 million in fiscal 2003, to $36.9 million in fiscal 2004. This increase was primarily the result of volume-related additional pit brokerage and clearing fees of $10.0 million, higher introducing broker commissions of $0.7 million and increased salaries and wages of $0.6 million. These increases were offset by reductions in other expenses, primarily professional fees, of $0.3 million. Interest expense increased from $37,000 in fiscal 2003, to $0.2 million in fiscal 2004.

Financial Services

The Financial Services segment is composed of two wholly-owned subsidiaries: FCStone Financial, Inc. and FCStone Merchant Services, LLC. Through these subsidiaries, we finance and facilitate physical commodity inventories through traditional lending agreements, or by entering into repurchase agreements with our customers. In addition, at times, we enter into arrangements with clients to share profits from transactions in physical commodities in exchange for financial support.

In this segment, we generate revenues from three primary sources: (1) interest income derived from commodity inventory financing through sale/repurchase agreements with commercial grain customers, (2) revenues from profit-share arrangements where we act as an agent in the transaction trades, and (3) revenues from the sale of energy and other various commodities in profit-share arrangements where we act as a principal in the transaction. For transactions in which we participate as an agent, the revenue recorded is limited to the contracted profit-share. For transactions in which we participate as a principal, we are required to record the gross amount of revenue from commodity sales and the gross amount of related costs. In 2005, the Financial Services segment represented approximately 4% of our consolidated income before minority interest, income tax and corporate overhead. Our customers in this segment consist primarily of commercial grain-related customers in the grain repurchase program and renewable fuels producers. The principal factors that affect our financial performance in this segment include:

• the level of commodity prices, and

• the volume of commodities produced and consumed by our customers.

The following table provides the financial performance of this segment.

	Year Ended August 31,							Nine Months Ended May 31,
	2003		2004			2005		2005		2006
	(dollars in thousands)
Sales of commodities	$	—	$	—		$	22,629	$	21,564	$	24,229
Cost of commodities sold		—		—			22,413		21,383		24,103
Gross profit on commodities sold		—		—			216		181		126
Commissions and clearing fees		—		—			—		—		—
Service, consulting and brokerage fees		—		—			—		—		—
Interest		1,303		1,519			1,128		843		2,652
Other revenues		984		998			2,018		1,594		1,109
Revenues, net cost of commodities sold		2,287		2,517			3,362		2,618		3,887
Costs and expenses:
Expenses (excluding interest expense)		1,045		1,702			1,869		1,376		1,760
Interest expense		1,133		1,262			937		690		2,229
Total costs and expenses (excluding cost of commodities sold)		2,178		2,964			2,806		2,066		3,989
Segment income (loss) before minority interest and income taxes	$	109	$	(447	)	$	556	$	552	$	(102	)

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Nine Months Ended May 31, 2006, Compared to Nine Months Ended May 31, 2005

Sales of commodities increased $2.7 million, or 12.4%, from $21.6 million in the nine months ended May 31, 2005, to $24.2 million in the nine months ended May 31, 2006. The cost of commodities sold increased $2.7 million, or 12.7%, from $21.4 million in the nine months ended May 31, 2005, to $24.1 million in the nine months ended May 31, 2006. These increases were primarily due to an increase in the number of financing transactions we entered into as a principal, which requires us to record the gross amount of revenue and costs from commodity sales.

Interest income increased $1.8 million, or 214.6%, from $0.8 million in the nine months ended May 31, 2005, to $2.7 million in the nine months ended May 31, 2006. This increase resulted from increased activity in the grain inventory financing program and higher short-term interest rates. Other income decreased $0.5 million, or 30.4%, from $1.6 million in the nine months ended May 31, 2005, to $1.1 million in the nine months ended May 31, 2006, primarily due to a decrease in the profitability of financing transactions entered into as agent.

Expenses, excluding interest expense, increased $0.4 million, or 27.9%, from $1.4 million in the nine months ended May 31, 2005, to $1.8 million in the nine months ended May 31, 2006, primarily due to increased railcar lease costs. Interest expense increased $1.5 million, or 223.0%, from $0.7 million in the nine months ended May 31, 2005, to $2.2 million in the nine months ended May 31, 2006. The increase in interest expense resulted from additional borrowings related to the increased activity in the grain inventory financing program and higher short-term interest rates.

Year Ended August 31, 2005, Compared to August 31, 2004.

Sales of commodities increased $22.6 million from $0.0 million in fiscal 2004, to $22.6 million in fiscal 2005. The cost of commodities sold increased to $22.4 million in fiscal 2005. These increases were primarily a result of the startup of the steel and energy commodities financing business of FCStone Merchant Services, LLC, which had no revenues during fiscal 2004, but generated revenues of $23.7 million during fiscal 2005.

Interest income decreased $0.4 million, or 25.7%, from $1.5 million in fiscal 2004, to $1.1 million in fiscal 2005, primarily due to lower average customer account balances in the grain inventory financing program. Other revenues increased $1.0 million, or 102.2%. from $1.0 million in fiscal 2004, to $2.0 million in fiscal 2005, primarily due to the increased profitability of financing transactions entered into as an agent.

Expenses, excluding interest expense, increased $0.2 million, or 9.8%, from $1.7 million in fiscal 2004, to $1.9 million in fiscal 2005. This increase was primarily due to an increase in professional fees and other expenses for FCStone Merchant Services. Interest expense decreased $0.3 million, or 25.8%, from $1.3 million in fiscal 2004, to $0.9 million in fiscal 2005, as a result of decreased activity in the grain inventory financing program.

Year Ended August 31, 2004, Compared to August 31, 2003.

Interest income increased $0.2, or 16.6%, from $1.3 million in fiscal 2003, to $1.5 million in fiscal 2004, primarily due to increased volumes of grain financed in the grain inventory financing program. Other income remained constant at $1.0 million for both fiscal 2003 and fiscal 2004.

Expenses, excluding interest expense, increased $0.7 million, or 62.9% from $1.0 million in fiscal 2003, to $1.7 million in fiscal 2004. This increase in expenses was primarily due to personnel added in late fiscal 2003 to expand this segment’s business. Interest expense increased $0.1 million, or 11.4%, from $1.1 million in fiscal 2003, to $1.3 million in fiscal 2004, primarily as a result of increased activity in the grain inventory financing program.

Grain Merchandising

The Grain Merchandising segment acts as a dealer in and manager of physical grain and fertilizer through a 70% interest in FGDI, LLC. FGDI acts as a grain dealer in the United States and international markets, with

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operations primarily in, Asia, Latin America and Canada. In this segment, we also manage a pool of grain originated by a group of elevators in Texas. We generate a majority of our revenues in this segment from the sale of grain. The principal factor that affects our financial performance in this segment is the global supply of and demand for grain. In 2005, this segment was not profitable on the basis of income before minority interest, income tax and corporate overhead. We have taken steps to return this segment to profitability by focusing our efforts on domestic grain merchandising, where there are higher risk-adjusted margins and the opportunity to capitalize on a growing renewable fuels industry.

The following table provides the financial performance of this segment.

	Year Ended August 31,							Nine Months Ended May 31,
	2003		2004		2005			2005		2006
	(dollars in thousands)
Sales of commodities	$	1,093,199	$	1,424,548	$	1,237,812		$	982,440	$	831,252
Cost of commodities sold		1,081,259	$	1,409,126		1,223,044			969,614		819,673
Gross profit on commodities sold		11,940		15,422		14,768			12,826		11,579
Commissions and clearing fees		—		—		—			—		—
Service, consulting and brokerage fees		—		—		—			—		—
Interest		51		68		153			103		425
Other revenues		2,765		2,230		2,582			1,958		1,310
Revenues, net of cost of commodities sold		14,756		17,720		17,503			14,887		13,314
Costs and expenses:
Expenses (excluding interest expense)		10,980		12,322		16,691			11,493		11,467
Interest expense		1,907		3,168		2,849			2,141		2,758
Total costs and expenses (excluding cost of commodities sold)		12,887		15,490		19,540			13,634		14,225
Segment income (loss) before minority interest and income taxes	$	1,869	$	2,230	$	(2,037	)	$	1,253	$	(911	)

Nine Months Ended May 31, 2006, Compared to Nine Months Ended May 31, 2005

Sales of commodities decreased $151.2 million, or 15.4%, from $982.4 million in the nine months ended May 31, 2005, to $831.3 million in the nine months ended May 31, 2006. Cost of commodities sold decreased $149.9 million, or 15.5%, from $969.6 million in the nine months ended May 31, 2005, to $819.7 million in the nine months ended May 31, 2006. Gross profit on commodities sold decreased $1.2 million, or 9.7%, from $12.8 million in the nine months ended May 31, 2005, to $11.6 million in the nine months ended May 31, 2006. The decrease in sales of commodities, cost of commodities sold and gross profit was primarily the result of a 20.7 million bushels, or 10.3%, decrease in the volume of grain bushels sold from 201.3 million bushels in the nine months ended May 31, 2005, to 180.6 million bushels in the nine months ended May 31, 2006, as the gross margin per bushel remained constant. The decrease in the volume of grain sold was a result of the redirection of FGDI to focus on the domestic market, resulting in a decline in export volume.

Other income decreased $0.6 million, or 33.1%, from $2.0 million in the nine months ended May 31, 2005, to $1.3 million in the nine months ended May 31, 2006. This decrease resulted from a decrease in service revenue from ocean vessels and a decrease in patronage dividend income received from CoBank, which declined due to our lower average borrowings. Interest income increased $0.3 million from $0.1 million in the nine months ended May 31, 2005, to $0.4 million in the nine months ended May 31, 2006.

Expenses, excluding interest expense, remained essentially unchanged at $11.5 million in the nine months ended May 31, 2005 and 2006. Interest expense increased $0.6 million, or 28.8%, from $2.1 million in the nine months ended May 31, 2005, to $2.8 million in the nine months ended May 31, 2006, primarily due to increasing variable interest rates on the lines of credit.

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Year Ended August 31, 2005, Compared to Year Ended August 31, 2004

Sales of commodities decreased $186.7 million, or 13.1%, from $1,424.5 million in fiscal 2004 to $1,237.8 million in fiscal 2005. The cost of commodities sold decreased $186.1 million, or 13.2%, from $1,409.1 million in fiscal 2004, to $1,223.0 million in fiscal 2005. The decrease in sales of commodities and cost of commodities sold was primarily the result of lower grain prices, as volumes remained relatively constant at approximately 258 million bushels merchandised in each year. Gross profit decreased $0.6 million, or 4.2%, from $15.4 million in fiscal 2004, to $14.8 million in fiscal 2005. This decrease was due to a slight decline in per-bushel margins from fiscal 2004 as a result of lower export margins in fiscal 2005.

Other income increased $0.4 million, or 15.8%, from $2.2 million in fiscal 2004, to $2.6 million in fiscal 2005, primarily due to the collection of a litigation settlement. Interest income increased $0.1 million from $0.1 million in fiscal 2004, to $0.2 million in fiscal 2005.

Expenses, excluding interest expense, increased $4.4 million, or 35.5%, from $12.3 million in fiscal 2004, to $16.7 million in fiscal 2005. This increase was primarily the result of a $3.2 million increase in bad debts related to the write-off of two international receivables on grain sold. In addition, the increase in expenses was caused by an increase in legal and professional fees of $0.7 million primarily due to ongoing export-related arbitration claims, collection activities, and other legal disputes. Interest expense decreased $0.3 million, or 10.1%, from $3.2 million in fiscal 2004, to $2.8 million in fiscal 2005, primarily due to lower average borrowings and lower interest rates.

Year Ended August 31, 2004, Compared to Year Ended August 31, 2003

Sales of commodities increased $331.3 million, or 30.3%, from $1,093.2 million in fiscal 2003, to $1,424.5 million in fiscal 2004. The cost of commodities sold increased $327.9 million, or 30.3%, from $1,081.3 in fiscal 2003, to $1,409.1 million in fiscal 2004. These increases were primarily due to higher grain prices, as well as an increase in grain merchandised of 10 million bushels, or 4%, from 248 million bushels in fiscal 2003, to 258 million bushels in fiscal 2004. Gross profit increased $3.5 million, or 29.2%, from $11.9 million in fiscal 2003, to $15.4 million in fiscal 2004. This increase was due primarily to a higher level of bushels merchandised and an increase in margin per bushel resulting from a greater proportion of higher-margin export bushels.

Interest and other revenue decreased $0.5 million, or 18.4%, from $2.8 million in fiscal 2003, to $2.3 million in fiscal 2004, primarily due to a decrease in service revenue from ocean vessels.

Expenses, excluding interest expense, increased $1.3 million, or 12.2%, from $11.0 million in fiscal 2003, to $12.3 million in fiscal 2004. This increase was primarily a result of higher employee compensation and employee benefits of $0.6 million due to expanded operations in the last year and an increase in bad debts of $0.5 million. Interest expense increased $1.3 million, or 66.1%, from $1.9 million in fiscal 2003, to $3.2 million in fiscal 2004. The increase was primarily due to the higher level of bushels handled, increased commodity prices and additional export bushels requiring greater inventory and receivable carrying time.

Corporate and Other

The Corporate and Other segment generated insignificant amounts of revenue during the three fiscal years ended August 31, 2005, and the nine months ended May 31, 2005, and 2006. Expenses increased $2.0 million, or 58.8%, from $3.3 million in the nine months ended May 31, 2005, to $5.3 million in the nine months ended May 31, 2006. This increase in expenses was primarily a result of increased employee incentive plan accruals due to the higher net income and additional staff and related benefits.

The Corporate and Other segment consists of income from investments in other companies accounted for using the equity method and overall corporate level expenses primarily related to employee compensation and benefits, travel, technology, professional fees, director fees, and general insurance. Corporate net expenses for

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the three years ended August 31, 2005, were $3.5 million in fiscal 2003, $4.0 million in fiscal 2004, and $4.8 million in fiscal 2005. The primary reason for the increases was employee compensation and the related benefits due to the hiring of additional personnel and additional incentive plan costs.

Liquidity and Capital Resources

Overview

We have substantial lines of credit available and annual cash flow from operations to support continued additional growth in each segment of our operations. We believe we have a strong liquidity position and expect to maintain this position over the next twelve months as a result of the available capacity under our revolving credit facilities, operating cash flows and our remaining balance of available cash and temporary cash investments.

Primary Sources and Uses of Cash

Operating cash flow provides the primary source of funds to finance operating needs, capital expenditures and equity investments. As necessary, we supplement operating cash flow with debt to fund these activities, primarily in the Grain Merchandising and Financial Services segments. Excess operating cash is used to fund shareholder dividends and, during the period we operated as a cooperative, patronage dividends to members.

Cash Flows

Unrestricted cash and cash equivalents consist of unrestricted cash and highly liquid investments with original maturities of three months or less. Changes to our unrestricted cash and cash equivalents balances are due to our operating, investing and financing activities discussed below.

The following table sets forth our cash flows from operating activities, investing activities and financing activities for the three fiscal years ended August 31, 2005, and the nine months ended May 31, 2005, and 2006.

	Year Ended August 31,									Nine Months Ended May 31,
	2003			2004			2005			2005			2006
	(dollars in thousands)
Cash flows provided by (used for):
Operating activities	$	(7,767	)	$	17,102		$	30,344		$	26,111		$	(1,118	)
Investing activities		2,385			10,658			(7,483	)		(6,824	)		(24,515	)
Financing activities		7,845			(24,923	)		(5,659	)		3,252			45,097
Net increase in cash and cash equivalents	$	2,463		$	2,837		$	17,202		$	22,539		$	19,464

Cash Flows from Operations

In the commodities industry, companies report trading activities in the operating section of the statement of cash flows. Due to the potential volatility in the commodities market, wide fluctuations in the balances of customer segregated assets, deposits held at various exchanges, marketable securities and customer commodity accounts may occur from day-to-day. As a result of this volatility, cash flows from operations may fluctuate positively or negatively at the end of a reporting period. These fluctuations may not be indicative of the health of our business.

Cash used in operating activities was $1.1 million for the nine months ended May 31, 2006, which consisted of net income of $11.4 million offset by $12.5 million utilized for working capital. The $12.5 million utilized for working capital primarily consisted of increases in commodity accounts receivable/payable; marketable securities and customer segregated assets, net; trade accounts receivable and advances on grain and inventories. These were offset by increases in trade accounts payable and advances. Cash provided by operating activities was

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$26.1 million for the nine months ended May 31, 2005, which consisted of net income of $4.9 million increased by $1.4 million of non-cash items and $19.8 million of cash provided by working capital.

Cash provided by operating activities was $30.3 million for the year ended August 31, 2005, which consisted of net income of $6.6 million decreased by $1.0 million of non-cash items and $24.7 million of cash provided by working capital. Cash provided by operating activities was $17.1 million for the year ended August 31, 2004, which consisted of net income of $6.4 million increased by $1.3 million of non-cash items and $9.4 million of cash provided by working capital. Cash used in operating activities was $7.8 million for the year ended August 31, 2003, which consisted of net income of $4.3 million increased by $0.8 million of non-cash items and offset by $12.9 million utilized for working capital.

Cash Flows from Investing Activities

Cash used in investing activities for the nine months ended May 31, 2006, primarily consisted of $19.3 million of issued notes receivable, associated with the increased activity of the grain inventory financing program within the Financial Services segment, and $4.9 million of purchases of exchange memberships and stocks. The Exchange membership seats and stock provide us with the right to do business on the various exchanges. We have moved towards owning our own exchange seats and stock, rather than relying on memberships from affiliated individuals.

Cash used in investing activities was $6.8 million for the nine months ended May 31, 2005, consisting primarily of $5.1 million of issued notes receivable and $0.9 million of purchased exchange memberships and stock. Cash used in investing activities was $7.5 million for fiscal 2005, consisting primarily of $7.6 million of issued notes receivable and offset by net proceeds of $1.2 million on the sale of exchange memberships. Cash provided by investing activities was $10.7 million for fiscal 2004, consisting primarily of $9.7 million collected on notes receivable and $1.9 million in proceeds from the sale of exchange membership stock. Cash flow provided by investing activities was $2.4 million for fiscal 2003, consisting primarily of $2.5 million collected on notes receivable.

Cash Flows from Financing Activities

Cash provided by financing activities was $45.1 million for the nine months ended May 31, 2006, primarily consisting of $46.5 million of proceeds drawn on our credit facilities, offset by payment of shareholder dividends. The notes payable proceeds were used primarily to issue notes receivable associated with the grain inventory financing program and purchase inventories. Cash provided by financing activities was $3.3 million for the nine months ended May 31, 2005 consisting primarily of $9.4 million of proceeds from notes payable, offset by payment of patronage dividends to members. Cash used by financing activities was $5.7 million for fiscal 2005, consisting primarily of payments on our credit lines and payment of patronage dividends, offset by proceeds from the issuance of subordinated debt and common stock. See “—Common Stock Issuance” and “—Short- and Long-Term Debt”. Cash used in financing activities was $24.9 million for fiscal 2004, consisting primarily of payments on our credit lines, offset by proceeds from subordinated debt. Cash provided by financing activities was $7.8 million for fiscal 2003, consisting primarily of $11.0 million of proceeds drawn on our credit facilities, offset by deposits to restricted escrow accounts and payment of patronage dividends.

Common Stock Issuance

We generated $4.5 million as a result of the initial sale of stock to the ESOP, which was consummated in August 2005. Our common stock subscription offering to existing shareholders, which was commenced on April 15, 2005, and continued until June 29, 2005, raised an additional $1.7 million. These transactions provided additional working capital to meet the increased regulatory capital requirements resulting from increased growth in the C&RM and the Clearing and Execution Services segments of our business.

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Common Stock Dividends

On October 27, 2005, our board of directors declared a common stock dividend totaling $2.9 million, payable on December 22, 2005. Prior to our conversion from a cooperative to a stock corporation, patronage dividends were paid to members based on a certain amount of the fees paid by our members in their role as customers in the current year. Future regular dividends may be declared and paid at the discretion of the board of directors. Any determination to pay cash dividends will be at the discretion of our board of directors, and will depend upon our results of operations and cash flows, our financial position and capital requirements, general business conditions, legal, tax, regulatory, rating agency and any contractual restrictions on the payment of dividends and any other factors our board of directors deems relevant.

Short- and Long-Term Debt

We believe we have adequate lines of credit available to conduct our business. See “—Credit Facilities.” Certain of the credit facilities are used to a greater extent than others, and represent a significant portion of the proceeds drawn on our lines. Our Grain Merchandising segment has a $68.0 million line of credit with CoBank and a $8.0 million line of credit with AFG Trust Finance available to finance its operations, including carrying significant accounts receivable and inventory, and is used extensively throughout the year. Our Financial Services segment has a $96.0 million line of credit with Deere Credit, Inc and a $75.0 million line of credit with CoBank available to finance its grain inventory repurchasing program. This program’s demand tends to fluctuate throughout the year. While usage corresponds to demand fluctuations, the lines are used consistently throughout the year.

Credit Facilities

We maintain a number of lines of credit to support operations. A summary of such lines is noted below.

Creditor	Renewal/Expiration Date	Use	Amount Available			Amount Outstanding at May 31, 2006
			(dollars in millions)
Deere Credit, Inc.	March 1, 2007	Margin Calls	$	36.75		$	-0-
Deere Credit, Inc.	March 1, 2007	Repurchase Agreements		96.0			27.4
Deere Credit, Inc.	October 1, 2009	Subordinated Debt for Regulatory Capital		7.0			6.0
Deere Credit, Inc.	October 1, 2009	General Corporate		10.25			8.2
Total Deere				150.0			41.6
CoBank, ACB	December 31, 2007	Grain Merchandising		68.0	(1)		26.6
CoBank, ACB	March 28, 2008	Grain Merchandising		8.0	(1)		-0-
CoBank, ACB	December 30, 2006	OTC & Fuel Operations		10.0			-0-
CoBank, ACB	December 30, 2007	OTC & Fuel Operations		10.0			-0-
CoBank, ACB	May 1, 2007	Repurchase Agreements		75.0			2.9
Total CoBank				171.0			29.5
Harris, N.A.	Demand	Margin Calls		30.0	(2)		-0-
Harris, N.A.	January 31, 2007	Grain Deliveries		5.0			-0-
AFG Trust Finance Limited	May 25, 2007	Grain Merchandising		8.0			4.1
Industrial Revenue Bonds (Capitalized Lease Obligations)	Annual Payments to December 1, 2012	Mobile, Alabama facility additional storage		-0-			3.7
Fortis Capital Corp.	Demand	Financial Services operations		20.0			5.5
RZB Finance, LLC	Demand	Financial Services operations		8.0			-0-
Bank of Tokyo-Mitsubishi UFJ, Ltd.	Demand	Financial Services operations		10.0			8.5
Subordinated Debt	December 31, 2006	Regulatory Capital		1.8			1.0
Long-term Note	December 31, 2012	NYMEX seat		0.5			0.2

(1) Grain merchandising’s CoBank revolving credit line and term loan advances in the aggregate cannot exceed $68.0 million.

(2) Effective June 30, 2006, the amount available to borrow from Harris, N.A. has been temporarily increased from $15.0 million to $30.0 million through December 31, 2006.

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We have approximately $389 million available under current credit agreements. While there is no guarantee that we will be able to replace current credit agreements when they expire, based on our strong liquidity position and new capital structure, we believe we will be able to do so.

All of our credit facilities include financial covenants and the failure to comply with any such covenants could result in the debt becoming payable on demand. We were in compliance with all debt covenants effective May 31, 2006. The Grain Merchandising segment amended its debt covenants to be in compliance, effective May 31, 2006.

Due to the terms of the existing lines of credit in our Grain Merchandising segment, we expect our growth in this business segment will be limited by the capital it can retain from annual operations.

We carry significant open futures positions on behalf of our customers in the C&RM and the Clearing and Execution Services segments of our business. The above lines of credit in place for margin calls are rarely used, but necessary to cover any abnormal commodity market fluctuations and the margin calls they may produce. With our own and customer funds on deposit and the available credit lines noted above, management believes we have adequate capital reserves to meet any foreseeable market fluctuations based upon current commodity market activities.

Other Capital Considerations

Our wholly-owned subsidiaries, FCStone LLC and FCC Investments, Inc., are subject to various regulations and capital adequacy requirements. Pursuant to the rules, regulations, and requirements of the CFTC and other self-regulatory organizations, FCStone LLC is required to maintain certain minimum net capital as defined in such rules, regulations, and requirements. Net capital will fluctuate on a daily basis. FCC Investments, Inc. is required to maintain certain net capital as defined by the SEC.

Prior to April 1, 2006, Sowood Commodity Partners Fund LP (“Sowood”) owned a minority interest in FCStone Merchants Services, LLC (“Merchants”). On March 9, 2006, Merchants sent a redemption notice to Sowood, informing them of its intention to redeem their minority ownership interest in Merchants, in accordance with the Limited Liability Company Agreement. The redemption was completed on the close of business on March 31, 2006, with a redemption payment of $0.9 million.

Due to an ongoing dispute regarding the expansion of our grain facility in Mobile, Alabama, we may have to initially fund the remediation project to repair the damage to the bin and other affected structures while we seek to collect the remediation amount from our contractors, subcontractors and their insurers. See “Business—Legal Proceedings.”

In fiscal 2006, we loaned $1.5 million to Green Diesel LLC as part of its financing to build a biodiesel production facility to be located in Houston, Texas. The loan included the issuance of warrants exercisable for 48% of the equity of Green Diesel. We also committed to make available a $15 million line of credit to Green Diesel to be secured by all of its assets. Subsequently, Green Diesel decided to raise additional equity in order to build a larger production facility with an annual production capacity of approximately 46 million gallons. In order to prevent the dilution of our potential 48% interest in Green Diesel, we invested an additional $2.4 million. We expect to loan an additional $600,000 to Green Diesel to finance the expanded facility. We are not contractually bound to invest additional equity in Green Diesel. We believe the Green Diesel production facility will begin commercial production in late 2006.

Seasonality and Fluctuations in Operating Results

We generally experience seasonality in our operations with the first quarter typically being our strongest period as a result of the U.S. grain harvest. However, with global political factors and their effect on the commodities markets, we have been seeing more frequent trading volume spikes throughout the year than in the past.

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Off-balance Sheet Financing Activities

During fiscal 2004, our grain merchandising subsidiary, FGDI, began participating in a bank program to provide liquidity through the sale of insured receivables, with limited recourse. FGDI’s business purpose for entering into this program was to accelerate the receipt of funds and enable FGDI to utilize the increase in the line of credit available as a result of this program to generate additional sales. Aggregate sales of receivables during the fiscal 2004 were $21.7 million. This program ended on February 17, 2005, and no amounts remain outstanding in respect of accounts receivable previously sold. We do not anticipate that the expiration of this program will have a material impact on our future operations as we intend to concentrate more on domestic business that, along with current lower commodity prices, should result in reduced financing requirements for this segment. FGDI accounted for sales of receivables under these agreements as sales in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.

Contractual Obligations

The following table describes our cash payment obligations as of August 31, 2005:

	Payments Due by Period
	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
	(in thousands)
Subordinated debt	$	5,500	$	1,500	$	4,000	$	—	$	—
Obligation under capital lease		4,125		550		1,100		1,100		1,375
Notes payable		36,911		36,514		124		124		149
Operating leases		19,790		6,220		8,169		2,934		2,467
Purchase obligations(1)		68,262		68,262		—		—		—
Total	$	134,588	$	113,046	$	13,393	$	4,158	$	3,991

(1) Purchase obligations are legally binding and enforceable agreements, net of offsetting sale obligations, to purchase commodities at specific terms.

Based upon our current operations, we believe that cash flow from operations, available cash and available borrowings under our lines of credit will be adequate to meet our future liquidity needs.

Inflation

We believe that our results of operations are not materially affected by moderate changes in the general inflation rate. Inflation did not have a material affect on our operations in the fiscal years ended August 31, 2005, 2004 and 2003. Severe increases in inflation, however, that would affect the global and U.S. economies could have an adverse affect on our business, financial condition and results of operation.

Recently Issued Accounting Standards

In June 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, Accounting Changes and Error Corrections (SFAS 154), a replacement of APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle. Previously, most voluntary changes in accounting principles required recognition of a cumulative effect adjustment within net income of the period of the change. SFAS 154 requires retrospective application to prior periods’ financial statements unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, it does not change the transition provisions of any existing accounting pronouncements. Management does not believe adoption of SFAS 154 will have a material effect on our consolidated financial statements.

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In June 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48” or the “Interpretation”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income Taxes (“FASB No. 109”). FIN 48 clarifies the accounting for uncertainty in income taxes in an enterprise’s financial statements in accordance with FASB 109. This Interpretation requires a recognition threshold and measurement factor for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after July 1, 2007. We are still evaluating the impact of this Interpretation.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (SFAS 158). SFAS 158 requires that the net amount by which the defined benefit postretirement obligation is over or underfunded to be reported on the balance sheet. The funded-status amount will be measured as the difference between the fair value of plan assets and the projected benefit obligation, which includes all actuarial gains and losses, prior costs and any remaining transition amounts. SFAS 158 is effective for fiscal years ending after December 15, 2006. In addition, SFAS 158 requires the use of a measurement date as of the balance sheet date for fiscal years ending after December 15, 2008. We are still evaluating the impact of this pronouncement.

Quantitative and Qualitative Disclosures about Market Risk

Commodity Price Risk

As part of our grain merchandising activity in FGDI, we utilize futures and option contracts offered through regulated commodity exchanges to reduce risk. We follow a policy of hedging our grain transactions and physical fuel through the use of cash and futures contracts in order to minimize risk due to market fluctuations. Inventories and purchases and sales contracts are hedged to the extent practical so as to arrive at a net commodity position within the formal position limits set by us and deemed prudent for each commodity. We are exposed to risk of loss in the market value of net open commodity positions, which are calculated by aggregating grain inventories and grain subject to contract for purchase and sale. The following table presents the number of bushels in inventory, under purchase and sales contracts and in futures positions by commodity at May 31, 2006:

	Bushels
	Corn		Soybeans		Wheat		Oats & Barley
	(in thousands)
Inventory	3,655		397		1,924		—
Purchase Contracts	28,810		8,767		13,119		276
Sale Contracts	(6,203	)	(7,717	)	(1,304	)	(67	)
Futures Long	—		1,581		1,550		—
Futures Short	(26,230	)	(3,038	)	(15,262	)	(190	)
Net Open Position	32		(10	)	27		19

Bushel information is used to calculate the net open commodity position, which is sensitive to changes in commodity prices. Open cash and futures contracts for the purchase and sale of grain are reported at market value; therefore the net open commodity position multiplied by the year-end market price approximates fair value. A hypothetical 10% increase (or decrease) in the market price of the commodities listed in the table from the May 31, 2006 level would result in a gain (or loss) to future earnings of approximately $16,000.

Interest Rate Risk

We manage interest expense using fixed and floating rate debt. The debt instruments are carried at amounts approximating estimated fair value. Of our normal borrowing, greater than 90% of the outstanding balance at May 31, 2006, has a variable interest rate and except for the industrial revenue development bonds associated with the Mobile facility, practically all of our borrowing is on a short-term basis.

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Short-term debt used to finance inventories and receivables is represented by notes payable within thirty days or less. The blended interest rate for all such notes approximates current market rates.

In the financing of grain, as interest rates increase, the spread between future option months generally becomes wider, allowing larger incomes in grain margins to offset the potential increases in interest expense. A portion of the outstanding balance of variable rate debt is used to finance certain notes receivable to customers in the Financial Services segment. The interest charged on the notes receivable is also at a variable rate, therefore eliminating the interest rate risk on that debt. Of the variable rate debt, the average outstanding balance subject to interest rate risk of the past year was $43.7 million. A hypothetical 100 basis point increase (or decrease) in interest rates would result in a (loss) or gain to future earnings of $437,000, assuming a similar debt level throughout fiscal 2006.

The risk on variable rate long-term debt associated with the capital lease obligation in the amount of $3.7 million is not material to the financial statements. We believe the risk associated with these borrowings will not have an adverse effect on our financial position, results of operations or cash flows.

Foreign Currency Risk

We conduct most of our international business in U.S. dollars, but there remains a minor risk regarding foreign currency fluctuations. We hedge foreign currency risk using forward contracts to the extent practicable on those transactions. These contracts are marked to market though the same financial statement line as the underlying transactions to which they relate. Foreign currency fluctuations do, however, impact the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply.

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BUSINESS

Overview

We are an integrated commodity risk management company providing risk management consulting and transaction execution services to commercial commodity intermediaries, end-users and producers. We assist primarily middle market customers in optimizing their profit margins and mitigating their exposure to commodity price risk. In addition to our risk management consulting services, we operate one of the leading independent clearing and execution platforms for exchange-traded futures and options contracts. We serve more than 7,500 customers and in the twelve months ended May 31, 2006, executed more than 44.3 million derivative contracts in the exchange-traded and OTC markets. As a natural complement to our commodity risk management consulting services, we also assist our customers with the financing, transportation and merchandising of their physical commodity requirements and inventories. Our net income increased $6.5 million, or 131.9%, from $4.9 million for the nine months ended May 31, 2005, to $11.4 million in the nine months ended May 31, 2006.

We began offering commodity risk management consulting services to grain elevators in 1968. Since that time, our business has evolved to meet the changing needs of our customers. In response to these changing needs, we expanded our risk management products to include derivatives on agricultural commodities, energy commodities, forest products and food products. We originally operated as a member-owned cooperative that was governed by a mission to deliver professional marketing and risk management programs to enhance the profitability of our members and other customers. In 2000, we acquired the assets of another FCM, Saul Stone & Company, which enhanced our execution and clearing capabilities and gave us the ability to clear all U.S. exchange-traded commodity futures and options contracts. In 2005, we converted to a stock corporation to improve our access to financial capital and to facilitate continued growth in our operations.

We provide our customers with various levels of commodity risk management services, ranging from value-added consulting services delivered through our IRMP to lower-margin clearing and execution services for exchange-traded derivative contracts. Our consultative focus is demonstrated by our IRMP, which involves providing our customers with commodity risk management consulting services that are designed to help them mitigate their exposure to commodity price risk and maximize the amount and certainty of their operating profits. In performing consulting services, we educate our customers as to the commodity risks that they may encounter and how they can use the derivative markets to mitigate those risks. The IRMP forms the basis of our value-added approach serves as a competitive advantage in customer acquisition and retention. We offer our customers access to both exchange-traded and OTC derivative markets, integrating the two platforms into a seamless product offering delivered by our approximately 100 commodity risk management consultants.

We also offer clearing and execution services to a broad array of participants in exchange-traded futures and options markets including commercial accounts, professional traders, managed futures funds, introducing brokers and retail customers. We are an FCM with clearing-member status at all of the major U.S. commodity futures and options exchanges. As of July 31, 2006, we were the third largest FCM in the U.S., as measured by required customer segregated assets, not affiliated with a major financial institution or commodity producer, intermediary or end-user. Our exchange-traded futures and options transaction volumes have grown from 6.1 million contracts in fiscal year 2001 to 36.2 million contracts in fiscal year 2005 to 44.3 million contracts in the twelve months ended May 31, 2006, a CAGR of 51.8%. As of May 31, 2006, we had $825.3 million in customer segregated assets.

In addition to our Commodity and Risk Management and Clearing and Execution Services segments discussed above, we also operate in two other related business segments. In our Financial Services segment, through FCStone Financial, Inc. and FCStone Merchant Services, LLC, we offer financing and facilitation for our customers with respect to their inventories of physical commodities. FCStone Financial, Inc. offers financing services that help our customers finance physical grain inventories, while FCStone Merchant Services, LLC provides the same services for other commodities. FCStone Merchant Services, LLC also provides financing in

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transactions where it shares in profits with customers in commodity or commodity-related projects in exchange for financial support.

In the Grain Merchandising segment, we operate through our majority interest in FGDI, LLC. FGDI acts as a grain dealer in the United States and international markets, primarily Canada, Latin America and Asia. It also manages a pool of grain originated by a group of grain elevators in Texas. The primary role of FGDI is to link merchandisers of grain products through our network of industry contacts, serving as an intermediary to facilitate the purchase and sale of grain.

Industry

Overview

The commodity risk management industry is notable for both its fragmented nature and its overall breadth, as it serves commodity intermediaries, end-users and producers. The industry can generally be segmented into providers of either one, or both, of two essential services to customers: risk management consulting, and trade execution and clearing services. Risk management consulting is an advisory function by which a company advises its customer on strategies to manage its commodity risk. Trade execution and clearing services are performed by serving as an intermediary between a customer and a commodity exchange or other counterparty.

These two services are offered by a number of different types of companies, all of which possess different operating traits and strengths. In general, the commodity risk management industry can be broken down into four basic types of companies with the following traits:

• Pure consultants—Provide consulting services, but do not serve as a trading intermediary or offer access to the futures exchanges and OTC markets

• Clearing futures commission merchants—Provide trade execution, but generally do not offer broad-based consulting services

• Captives—Provide both consulting and trade execution as divisions of large financial institutions or commodity producers, intermediaries or end users that developed risk management skills in their own operations and are selling them to third parties

• Integrated independent FCMs—Provide both consulting and trade execution from an unconflicted platform

Companies in the commodity risk management industry can derive income from four primary sources: (1) commission and transaction revenues from the execution and clearing of exchange-traded futures and options contracts, (2) brokerage from OTC transactions, (3) interest income derived from cash balances in customers’ accounts, and (4) risk management service and consulting fees. Commissions and related transaction fees are on a per trade basis and typically depend on the number of trades a customer executes. In addition, a company earns interest income on margin posted by its customers. Consulting fees are charged on a monthly or quarterly basis for services offered, including analyzing the customers’ needs, recommending hedging strategies, daily market commentary and monthly and quarterly updates.

Commodity Risk Management Consulting

The global market for commodities is constantly changing, as volatile weather patterns and geopolitical situations alter local, national and global economies. As the commodity and capital markets have become more global, India and China have emerged as two large consumers of commodities, which has increased the volatility of the commodity markets. At the same time, professional traders and hedge funds are increasingly drawn to the ensuing volatility and opportunities for trading profit, enhancing the volatility of these markets even further. The higher prices and volatility of commodities caused by the convergence of these events have increased the need for risk management by companies that supply or consume commodities or end-products.

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Although commodity risk management has been made more accessible and more cost-effective by the increasing sophistication of trading platforms and the continued proliferation of exchange-traded and OTC products, companies seeking to manage risk must overcome the increasing complexity of today’s markets in order to execute a successful commodity risk management program. Faced with this complexity, companies seek commodity risk management consultants that can educate them on the markets and develop strategies to mitigate commodity risk in their business. Industries that have not traditionally focused on commodity risk are generating increased demand for risk management consulting services due to the changing market environment for commodities and the need to optimize profit margins and mitigate commodity risk.

Commodity risk management consultants perform a variety of functions for their customers. A risk management consultant works with the customer to identify its inherent commodity risk, recognizing the relationship between input and finished products and the price risk that a customer assumes in delivering its products. To provide valuable risk management proposals, the consultant must combine the experience to analyze the historical performance of commodity markets with the insight to discern how future events may differ from the past. Finally, a consultant must provide market information and program updates on a regular basis to facilitate the management of a customer’s commodity risk management program.

Trade Execution and Clearing

Trade execution and clearing is primarily provided by FCMs, which are intermediaries through which customers access exchange-traded derivatives. FCMs, which may be members of one or more exchanges, solicit or accept orders from customers for the purchase or sale of futures or options contracts and route those orders to the appropriate exchange. FCMs also hold their customers’ assets, including cash deposits and futures positions, facilitate customer trading in futures contracts listed on exchanges, guarantee customers’ trades to the exchange and sometimes extend credit to some customers seeking to access the exchange-traded and OTC markets.

FCMs generally fall into one of three categories: independent, a national or regional brokerage firm, or a division of a financial institution or commodity-oriented company. In addition, FCMs can be further segregated into clearing or non-clearing firms. Clearing firms own exchange memberships and can clear their customers’ trades, while non-clearing firms must rely on another clearing firm to fulfill this function for their customers. As of July 31, 2006, there were 177 FCMs registered with the CFTC.

FCMs execute and clear trades in exchange-traded derivative contracts. In contrast to OTC contracts, exchange-traded contracts have standardized terms that are determined by the exchange rather than market participants. Until the early 1970s, futures markets were restricted to physical commodities (e.g. oil, corn, wheat, sugar, copper). Since that time, futures markets have expanded to include additional products, including currencies, interest rate instruments and stock indices.

FCMs execute customer orders on the exchange and maintain records of each customer’s position, segregated funds, money balances and completed transactions. In return for these services, FCMs collect commissions on each trade order from customers and earn interest income on cash deposits held on behalf of their customers.

FCMs are subject to a number of regulatory requirements, including the maintenance of a minimum level of net capital. FCMs are regulated by the CFTC, an independent federal regulatory agency, and must be a member of the National Futures Association, an industry-wide self-regulatory organization. Clearing FCMs are also members of one or more exchanges registered with, and regulated by, the CFTC. Such exchanges are also considered self-regulatory organizations. Each FCM has a designated self-regulatory organization which takes primary responsibility for the FCM. The CME is our designated self-regulatory organization.

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FCMs either source customers directly through their own relationships or indirectly through introducing brokers. Direct customers include the following three types of customers: retail customers, professional traders or institutional customers. Retail customers have grown recently with the advent of electronic trading and the emergence of simple-to-understand products. The development of on-line front-end systems has accelerated this trend. Professional traders include floor traders (locals that are members of exchanges that trade on their own account) or professional traders that trade off the floor of the exchange or in dedicated off-site facilities. Lastly, institutional customers include both commercial customers, such as commodity producers or end users, and large institutions, such as pension funds or hedge funds.

FCMs also source customers through relationships with introducing brokers, who are individuals or organizations that have relationships with various retail, professional or institutional customers of their own. Introducing brokers provide all the typical functions of a broker, except they do not accept money, securities or property of a customer. There are two types of introducing brokers: guaranteed and independent. Guaranteed introducing brokers enter into a guarantee agreement with an FCM under which the FCM agrees to be jointly and severally liable for all of the introducing broker’s obligations under the Commodity Exchange Act, in exchange for exclusivity of the introducing broker’s futures transactions. An independent introducing broker must raise his own capital to meet the minimum financial requirements to transact, but can, as a result, have clearing relationships with multiple FCMs.

Industry Growth

The total international notional value outstanding of exchange-traded and OTC derivative contracts has expanded rapidly in recent years, evidencing the large growth potential of the commodity risk management industry. As the following chart demonstrates, the notional value outstanding of exchange-traded contracts has grown at a CAGR of 22.5% over the past seven years according to the Bank for International Settlements, while the OTC market has grown at a CAGR of 19.8% over the same time period.

Source: Bank for International Settlements

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While the exchange-traded market has grown slightly faster than the OTC market over the past seven years, the OTC market still is nearly five times larger than the exchange-traded market in notional value terms, which reflects the fact that the demand for the non-standard products continues to keep pace.

Industry Trends

We believe that growth in the risk management and derivative industries is driven by the following factors:

• Increasing Acceptance of Risk Management—Shareholders, securities analysts and portfolio managers increasingly expect companies to use all available resources to reduce business risk. At the same time, the management teams of public and private companies have become more sophisticated and recognize the need to manage commodity price risks in their business. Due to the continued evolution of derivative markets, this may involve using sophisticated options and futures strategies to hedge commodity consumption and production risks. Investors and operators have found that risk management strategies can reduce the volatility of earnings, lower borrowing costs and increase equity valuations.

• Increasing Commodity Prices and Price Volatility Drives Need for Risk Management—Over the past three years, the price of most commodities has risen substantially, as evidenced by the increase in the Reuters/Jefferies CRB Index from 169 on January 1, 2002 to 283 on September 29, 2006, a CAGR of 11.6% per year. As prices have increased, volatility has also risen, as evidenced by the changes in the historical volatility of the Reuters/Jefferies CRB Index, which is higher in 2006 than it has been for the past ten years. In addition, highly uncertain geo-political conditions drive more volatile cash markets that provide an incentive for market participants to hedge their exposure and are attractive to market professional traders, resulting in an increase in trading volume. An increase in commodities prices and volatility results in commodities becoming a larger economic input and increases the need to hedge commodity price risk. We believe this will result in increased demand for our risk management consulting services and higher trading volumes, which should benefit our C&RM and Clearing and Execution segments.

Copyright 2006. Reuters America LLC and/or Jefferies Financial Products, LLC or their affiliates. Used with permission. Reuters America LLC and Jefferies Financial Products, LLC do not guarantee the quality, accuracy and/or completeness of the data included herein and have no responsibility therefor. The securities offered in this prospectus are not sponsored, endorsed, sold or promoted by Reuters America LLC, Jefferies Financial Products, LLC or any of their subsidiaries or affiliates, and they make no representation or warranty, express or implied, regarding the advisability of investing in those securities.

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• Electronic Trading—Traditionally, commodity futures and options traded on physical trading floors in areas called “pits” through an auction process called “open outcry”. In order to expand their markets, futures exchanges have added electronic trading platforms that coexist with their open outcry structure, which has resulted in better communications and information for market participants and lower trading costs. In addition, electronic only exchanges such as the IntercontinentalExchange, Inc., which is an all electronic energy exchange, have emerged and grown dramatically in size. The result has been higher trading volumes, as evidenced by the following chart that shows a CAGR of 7.3% for open outcry trading and a CAGR of 79.8% for electronic trading at the CME since 1998. Higher trading volumes result from shifts to electronic trading because execution costs decline significantly and transparency is enhanced. We anticipate that electronic trading will positively impact both our C&RM and Clearing and Execution segments by reducing our costs and enhancing the attractiveness of our consulting services.

Source: CME

• Product Innovation—In general, the number of contracts available for trading on exchanges has grown significantly in recent years. For example, according to the Futures Industry Association, in December 2001 the CME and CBOT traded a combined number of 142 types of contracts, while in June 2006 the number of different contracts traded at both exchanges had increased to 222. Innovation in exchange-traded contracts occurs through either standardizing OTC products to bring them onto an exchange or offering new “downsized” products that are smaller versions of current exchange-traded products, which makes them available to a larger group of investors. In addition, the advent of electronic trading makes product innovation less expensive and more cost effective, as the lower costs result in fewer contracts needed to be traded to recoup startup costs. We believe the continued growth in new products, combined with new electronic trading platforms, will attract new customers and increase demand for the services offered by our C&RM and the Clearing and Execution Services segments.

• Influence of Hedge Funds and Professional Traders—The emergence of hedge funds during the 1990s and their continual growth in the past decade has changed markets dramatically. Hedge funds, which are basically unregulated pools of capital, are free to be aggressive and pursue any investment where they

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see the opportunity to make money. As demand for commodities has increased, prices have risen and market volatility has increased, hedge funds have become more interested in the commodity markets. Whether their interest is in speculating in commodity markets, using the commodity markets to hedge inflation risk or entering the commodity markets to address the business requirements of companies in which they are invested, hedge funds are having significant impact on the commodity derivative markets.

• Deregulation—The opening of markets within the financial services industry in the U.S., Europe and Asia has increased customer access to products and markets, reduced regulatory barriers to product innovation and encouraged consolidation. In particular, in the U.S., many regulatory barriers to product development were removed or reduced by the enactment of the Commodity Futures Modernization Act of 2000 (“CFMA”). The CFMA accelerated product development in the futures markets by reducing the length of time it takes exchanges to introduce new products and increasing legal certainty of the OTC markets. Although not all new products are successful, the ability to quickly develop new products at the exchange level is expected to result in greater volumes of trading in our FCM business.

Competitive Strengths

Long-term Relationship Focused Commodity Risk Management Company

We are a relationship-oriented company focused on commodity risk management consulting services. We believe that we are known in the market for our high-quality services and our expertise in understanding the local, regional and national commodity markets. We have leveraged our long-standing presence in these markets to penetrate rapidly evolving commodity markets, where the risk management needs of the participants are changing due to high commodity prices and increased commodity price volatility. We believe our key competitive advantage is the ability to work with customers to help them design and implement commodity risk management programs, which leads to enduring customer relationships and more predictable financial performance for our customers.

Skilled Risk Management Consultants

We employ approximately 100 commodity risk management consultants, who have an average tenure with us of over eight years, most of whom have extensive product and industry expertise. Our risk management consultants are in regular contact with customers as they provide consulting services and facilitate the IRMP. This close contact provides our consultants with an appreciation of the needs of our customers and the opportunities in the marketplace. As a result, our risk management consultants can identify opportunities and develop them into new products and strategies with the assistance of our experienced management team. Knowledge derived from this experience can also be applied to new commodity types and risks permitting us to expand into new markets.

Middle-Market Focus

We focus primarily on middle-market commercial commodity intermediaries, end-users and producers. These companies often have significant commodity risk requiring sophisticated risk management consulting services, but lack the resources or expertise to field an in-house team of risk management professionals. Our platform also enables us to extend commodity risk management consulting services to middle-market customers that may not be large enough to attract the attention of large financial institutions or commodity firms. We believe our integrated business model provides the greatest value to these middle-market companies.

Integrated Business Model

We operate an integrated business model whereby we develop commodity risk management strategies for our customers and execute them through both the exchange-traded and the OTC markets. By integrating our

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service offerings, we provide an efficient mechanism for developing and executing a customer’s commodity risk management program. During the nine months ended May 31, 2006, we traded 202,000 OTC contracts, which represented a 60.9% increase over the nine months ended May 31, 2005, when we traded 125,000 OTC contracts.

Management Expertise

Our senior management team is composed of individuals with experience working in commodity management, risk management or commodity trading. Our Chief Executive Officer, Paul Anderson, started at FCStone in 1987 as the director of the integrated marketing program and assumed the role of CEO in 1999 and has 31 years of experience in the industry. Our Chief Operating Officer, Stephen Gutierrez, started at FCStone in 2002 and possesses 32 years of experience in trading, risk and asset management of various commodities. In addition, our Chief Financial Officer, Robert Johnson has 25 years of experience in the industry, and has worked as CFO for FCStone since 1987. Our Executive Vice President, Jeff Soman joined FCStone in 2000 and, has worked in the commodities industries for 26 years.

Leading Position in Renewable Fuels Industry

Through our experience managing commodity risk, we have gained what we believe to be a leading role in the renewable fuels industry. The renewable fuels industry, which includes products such as ethanol and biodiesel, has grown at a rapid pace. For example, according to the Renewable Fuels Association, ethanol production capacity has grown at a CAGR of 24% since 2001. This growth has been driven by high crude oil prices and government programs to reduce U.S. dependence on foreign sources of energy. By leveraging our core competencies of risk management consulting and grain merchandising, we provide risk management services to producers representing approximately 20% of the domestic ethanol capacity. It is the experience that we have gained through our grain merchandising business that has allowed us to source the physical inputs for our ethanol-producing clients and to assist in marketing the by-products of ethanol production.

Independent Consulting and Access to Markets

We are an independent commodity risk manager and FCM that is not affiliated with a major financial institution or commodity intermediary, end-user or producer. We are one of only a few independent commodity risk management consulting companies with the ability to offer full trade and order execution through every major commodities exchange in the world. Our independence gives us the ability to offer advice and services that are not influenced by our other operations. Our middle-market customers can be particularly sensitive to this issue, and accordingly, we believe our independence differentiates us from much of our competition.

Growth Strategies

Further Penetrate New Customer Segments

We believe there are significant opportunities to further penetrate new customer segments to diversify our revenue stream. We have capitalized on our reputation and position as a leading independent provider of commodity risk management consulting services to expand into new customer segments. Opportunities for potential growth include natural gas end-users, weather futures, the fuel surcharge business, forest products, food products, carbon or emission credits and international markets. We plan to continue deploying resources into areas where volatile market conditions have increased commodity risk exposure or have otherwise created new opportunities for intermediaries, end-users and producers.

Renewable fuels represent an industry with significant growth opportunities. According to the Renewable Fuels Association, the ethanol production capacity in the U.S. on October 5, 2006, was 5.0 billion gallons. There is an estimated 3.3 billion gallons of further production capacity under construction, which implies a growth rate in production capacity in the next one to two years of 66%.

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With our expertise in agricultural commodities and the energy industry, we believe that we are well-positioned to assist renewable fuels producers including ethanol and biodiesel producers, in managing their commodity input risk and renewable fuels output risk. In addition, our industry relationships have created other opportunities, including our investment in a biodiesel plant in Houston, Texas. We continue to pursue various initiatives in this area, including serving as an exclusive commodity supplier to renewable fuels plants and investing in carbon credits.

Expand Risk Management Consulting Services

We believe that offering new products and services to our existing customer base presents significant growth opportunities. Our risk management consultants continually examine the changing needs of our customers and identify solutions as our customers encounter new commodity-oriented risks. For example, in fiscal 2005 we developed a new grain product called the “FCStone Accumulator” for our grain elevator customers to market to their customers. The FCStone Accumulator allows producers to sell a commodity above the market price or end-users to purchase a commodity below the market price, with some inherent risks of this product offsetting these advantages. This product represents an example of our ability to bring new products to our traditional grain elevator customers to serve the needs of their grain producing customers.

Expand International Presence

We intend to continue our expansion into international markets where customers tend to be in the early stage of acceptance of commodity risk management consulting services and products. Our international initiative essentially began in 1996 with our direct marketing of commodity futures to internationally-based companies. This effort has evolved and we currently have five international offices located in Campinas, Brazil; Beijing China; Dalian, China; Winnipeg, Canada and Blenheim, Canada and representation in Dublin, Ireland. The customers in these markets tend to be in the early stage of acceptance of commodity risk management consulting services and products, which creates an opportunity for us to utilize the educative and consultative approach inherent in the IRMP to further penetrate the market. We anticipate that Brazil and China will be our two strongest international markets in the years to come.

Develop Human Capital

We intend to increase the number of new risk management consultants that we hire. Commodity risk management consultants enable us to deliver our value-added products and services to the marketplace. Our consultants are responsible for developing customer relationships, analyzing the commodity risk of our customers, developing strategies to mitigate this risk and executing these strategies at the direction of our customers. We continue to reassess and develop our training programs to address new and developing products and industries that have growth potential. In fiscal 2005, we hired ten new commodity risk management consultants who are currently in our two-year training program. We plan to hire approximately the same number for our fiscal 2007 training program. As our business grows we expect to continue to increase the number of new risk management consultants that we hire.

Understanding the critical role of our risk management consultants, we provide our risk management consultants with a continuing development program that includes formal training, mentoring and hands-on experience. We have experienced employee turnover among risk management consultants of less than 10% per year over the last three fiscal years. We attribute this low turnover to the platform and products provided these individuals to develop their business.

Capitalize on Shift to Electronic Trading

We intend to capitalize on the growth opportunities made available by the shift to electronic trading. Due to customer demand for electronic trading, new fully electronic exchanges have emerged and established exchanges have developed electronic platforms that trade alongside traditional open-outcry systems. The shift to electronic trading has resulted in a significant growth in trading volumes. For example, since 1998 electronic trading on the CME has grown at a CAGR of 79.8% while open outcry trading has grown at a CAGR of 7.3% over the same

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time period. The positive effects of electronic trading, will be most directly felt in our clearing business, where customers will be drawn to lower cost trading. In addition, the benefits of electronic trading extend into our commodity risk management business by lowering trading costs and increasing consultant productivity, enhancing the importance of a high level of service.

History

Our commodity risk management business can be traced back to 1955, when Farmers Grain Dealers Association of Iowa, which later became Agri Industries, first purchased a seat on the CBOT. Farmers Grain Dealers Association of Iowa began offering agricultural commodity risk management consulting services to grain elevators in 1968 through a commodity hedging and trading service program. Recognizing the need to better address its customers’ commodity hedging needs, Agri Industries formed Farmers Commodities Corporation (“FCC”) as a separate entity in 1978. In 1986, FCC became a stand-alone member-owned cooperative company with a mission to deliver professional marketing and risk management programs designed to enhance the profitability of its member customers.

Recognizing that physical commodity prices are driven by local supply and demand dynamics, we gradually extended our geographic reach. In the 1980s, FCC began its international efforts and also opened offices in Kansas City, Missouri; Omaha, Nebraska; and Minneapolis, Minnesota. In the 1990s, we expanded our operations into the eastern Corn Belt and opened an office in Champaign, Illinois. By the end of the decade, we opened southeastern markets to our customers by establishing an office in Buford, Georgia.

Throughout the 1980s and 1990s our company continued to identify and act on opportunities to better serve our customers. Cognizant of the value of continued risk education and consulting services in establishing long-term relationships with our commercial grain customers, we introduced our IRMP in 1987. At the same time, we recognized the need to facilitate the execution of our customers’ commodity hedging strategies, and we became a clearing member of the Kansas City Board of Trade in 1983 and the CBOT in 1988. In the early 1990s, we recognized that our customers faced operating risks related not only to their inventories of commodities but to the merchandising and transportation of commodities as well, and thus formed a cash grain subsidiary called Farmers Grain Dealers, Inc. Complementing that business, in 1996 we started a 10%-owned and managed transportation joint venture, Farmers Commodities Transportation Co., LLC and in 1997 leased an export shipping facility in Mobile, Alabama.

Our Clearing and Execution Services segment can be traced back to 1924 when Saul Stone and Company (“Stone”) was formed. In the 1930s, Stone became one of the first clearing members of the CME and over the following decades traded and hedged a wide range of agricultural commodities. In the late 1980s and early 1990s Stone expanded its clearing operation to include the CBOT and all major futures exchanges in New York. Possessing member status and complete back office operations at these various exchanges afforded Stone’s wholesale, institutional and retail customers full-service clearing and execution.

On July 1, 2000, FCC acquired the assets of Stone and formed a new wholly-owned subsidiary called FCStone LLC, which combined the FCM operations of FCC and Stone. FCC then changed its name to FCStone Group, Inc., which was reorganized under a holding company. The acquisition of Stone provided our customers with access to all of the major U.S. commodity futures and options exchanges and a full spectrum of commodity derivatives. As our commercial grain customers and their need for commodity risk education and consulting matured, we identified other customer segments that could benefit from our integrated, broad-based approach to commodity risk management. In addition to our Energy product line, which was formed in 1988, we began organizing other business lines catering to producers of renewable fuels and food service providers, among others.

Following the acquisition of Stone, and recognizing the strong secular industry trends towards increased importance of corporate risk management, robust growth in derivatives trading volumes worldwide, and the proliferation of derivatives products, we shed our cooperative status on March 1, 2005 and became a stock corporation.

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Operating Segments

Commodity and Risk Management

The Commodity and Risk Management segment is the foundation of our company. Consistent with our original mandate as a cooperative to serve our grain elevator members, we approach middle-market intermediaries, end-users and producers of commodities with the objective of serving as their commodity risk manager. Some of these customers are sophisticated and knowledgeable of the derivative markets and how they operate, understanding the inherent commodity risk of their business and pursuing their own risk management policies. At the same time, many of our customers look for guidance and consulting with regard to their commodity risk exposure and the use of the derivative markets to mitigate that risk.

Within the C&RM segment, we serve customers through a force of approximately 100 risk management consultants with a level of service that maximizes our abilities and the opportunity to retain the customer. Among more sophisticated customers, we provide less in the way of consulting services and focus more on providing a breadth of products and competitive pricing, while among our customers with less experience in the derivative markets, we provide a broad range of consulting services that are demonstrated most clearly in our IRMP. The IRMP is a fee-based commodity risk management consulting service that is based upon a review of our customers’ commodity inputs and outputs in their products and services, with exposures identified and quantified. We use the information obtained in this review to determine commodity exposures and design strategies intended to optimize their profit margins and mitigate our customers’ risks to changing commodity prices. We advise the client through monthly account reviews and an evaluation of existing hedge positions, as well as by review of year-to-date performance of the program.

We believe that our consulting services, including the IRMP, serve as a value-added competitive advantage in the acquisition and development of new customers. We provide our IRMP customers and other risk management consulting customers with assistance in the execution of their hedging strategies through our exchange-traded futures and options clearing and execution operations as well as access to more customized alternatives provided by our OTC trading desk. As our clients increase their knowledge and acceptance of risk management practices, they become more independent in their hedging decision-making and, in some cases, will transition to fully self-directed trading over a three- to five-year period. However, we often continue to provide transactional advice and consulting services to fully self-directed trading customers. Generally, our customers direct their own trading activity and we do not have discretionary authority to transact trades on behalf of our customers.

We maintain an extensive proprietary database of historical price information for each local market in which our customers operate. Local prices tend to react to similar fundamentals each year relative to the benchmark futures prices. Accordingly, these local characteristics can be analyzed and factored into a customer-specific risk analysis. A commodity price hedging program must recognize and account for these local differences because physical commodity prices are often driven by local supply and demand dynamics such as weather, transportation costs and availability, storage and insurance costs. While exchange–traded futures and options prices reflect the world market, local markets are considered to be more relevant to mid-sized commodity users. Therefore, we provide our customers with a tailored program reflective of the market characteristics within which they operate.

Reflective of the local nature of our product, we service our customers through 13 U.S. offices and five international offices. We currently serve approximately 460 customers through our IRMP.

We deliver our consulting services through an experienced force of approximately 100 risk management consultants. The average tenure of our consultants is eight years, while the annual turnover rate has averaged approximately 9% over the past four fiscal years. We maintain a formal training program for our incoming consultant trainees which provides a foundation in the basics of our business, including risk management, futures and options markets, OTC markets, financial statement analysis and derivative accounting. As part of the training process, new consultants apprentice with an experienced risk management consultant for two years before independently managing customer relationships.

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We organize our marketing efforts into customer industry segments. We currently serve customers in the following industries:

• Commercial Grain—The commercial grain customer segment represents the foundation of our C&RM Segment, as the roots of our company can be traced back to this business. Within this sector we provide services to grain elevators, traders, processors, manufacturers and end-users.

• Energy—The energy customer segment targets companies where energy represents a significant input cost into the production of their product or service. Such customers include producers, refiners, wholesalers, transportation companies, convenience store chains, auto and truck fleet operators, industrial companies, railroads and municipalities.

• Introducing Brokers—Introducing Brokers within our C&RM segment include individuals or organizations that maintain relationships with customers and intermediate transactions between the customer and ourselves. The customers within this segment are primarily agricultural producers.

• Latin America/Brazil—The customers within this customer segment are located predominantly in Mexico and Brazil. Our customers are involved in all sectors of agribusiness, including livestock production and feeding, flour milling and bakery, oilseed crushing and refining, grain merchandising, meat processing and sugar/ethanol production. We believe there are significant opportunities to deepen the penetration of risk management practices within this customer segment in this region.

• China—The China customer segment represents both Chinese FCMs as well as commercial companies seeking to hedge their commodity risk exposures. The Chinese FCMs are similar to introducing brokers, facilitating the transactions of their clients in the U.S. commodities markets. The commercial accounts, generally, represent significant processors of grain or other commodities.

• Renewable Fuels—The renewable fuels customer segment targets producers of ethanol and biodiesel products, capitalizing on the rapid growth occurring in the alternative fuels industry.

• Other—We maintain a number of developing customer segments where the adoption of risk management practices is increasing and our consultative approach is serving as a catalyst to customer adoption. These customer segments include customers with risk management needs in the areas of forest products, food services, transportation and weather-related products.

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Our integrated platform allows our customers, aided by our risk management consultants, to execute and clear commodity futures and options contracts for the purpose of establishing and maintaining their hedge positions through our C&RM segment. Alternatively, we are able to meet more customized hedging needs through our OTC trading desk. Our OTC trading desk, through broad access to commodity market participants as well as major financial institutions, is able to design hedge arrangements that may contain features with respect to contract performance, time period, commodity types, and transaction size that are not achievable in the highly-standardized exchange-traded commodity futures and options markets. Further, our OTC capability has provided an ability to create products that assist our customers, in turn, to offer value-added services to their clients. We believe that we are unique in offering both exchange-traded and OTC products to our middle-market target customers.

Source: Company Information

Within our C&RM business, we have experienced strong growth in contract trading volumes. Since 2001, growth in exchange-traded contract trading and OTC contract trading have both been robust. In that period, our OTC contract trading volume has grown at a CAGR of 94.6%, while exchange-traded contract volume has grown at a CAGR of 11.3%.

In 2005, the C&RM reported income before minority interest and income tax of $11.2 million, an increase from $7.9 million in fiscal 2004. For the nine months ended May 31, 2006, C&RM had income before minority interest and income tax of $15.7 million compared to $6.1 million for the nine months ended May 31, 2005. In fiscal 2005, the C&RM segment represented approximately 75% of our consolidated income before minority interest, income tax and corporate overhead.

Clearing and Execution Services

We seek to provide economical clearing and execution of exchange-traded futures and options for the institutional and professional trader market segments through the Stone division of our subsidiary, FCStone LLC. Through our platform, we accept customer orders and direct those orders to the appropriate exchange for execution. We then facilitate the clearing of our customers’ transactions. Clearing involves the matching of our customers’ trades with the exchange, the collection and management of margin deposits to support the

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transactions, and the accounting and reporting of the transactions to our customers. We seek to leverage our capabilities and capacity by offering facilities management or outsourcing solutions to other FCMs.

FCStone LLC is a registered FCM and a clearing member of all major U.S. commodity futures exchanges including the CME, CBOT, NYMEX, COMEX Division of NYMEX, New York Board of Trade (“NYBOT”), Kansas City Board of Trade and the Minneapolis Grain Exchange. We are one of the largest clearing members on the NYBOT and NYMEX as measured by contracts cleared.

We service our customers though a Wholesale Division and a Professional Trading Division:

Wholesale Division. Wholesale division customers generally consist of non-clearing FCMs, introducing brokers and clearing FCMs for which we provide back-office services such as trade processing and accounting. These customers serve as intermediaries to the ultimate customer transacting the futures or options contract.

Professional Trading Division. The professional trading customers consist of retail-oriented introducing brokers, professional traders and floor traders. In this division, we target high-volume users of the futures and options markets. We hold the largest share of the professional floor trader market at the NYBOT and the COMEX Division of NYMEX. Through our retail division, we also target managed futures funds, hedge funds and commodity trading advisors. We believe that this segment of our customer base will benefit from the increasing significance of electronic trading, providing them a greater opportunity to trade across markets and commodities.

Source: Company Information

Since fiscal 2001, as demonstrated above, contract trading volume has grown at a CAGR of 58.9% within our Clearing and Execution Services segment. In fiscal 2005, the Clearing and Execution Services segment reported income before minority interest and income tax of $5.2 million, an increase from $3.4 million in fiscal 2004. For the nine months ended May 31, 2006, Clearing and Execution had consolidated income before minority interest and income tax of $8.5 million, an increase from $3.8 million for the nine months ended May 31, 2005. In fiscal 2005, the Clearing and Execution Services segment represented approximately 35% of our consolidated income before minority interest, income tax and corporate overhead.

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Financial Services

Our Financial Services segment is comprised of FCStone Financial, Inc. and FCStone Merchant Services, LLC. FCStone Financial, Inc. serves as a grain financing and facilitation business through which we lend to commercial grain-related companies against physical grain inventories. We use sale/repurchase agreements to purchase grain evidenced by warehouse receipts at local grain elevators subject to a simultaneous agreement to sell such grain back to the original seller at a later date at a higher price.

Our activity in FCStone Financial, Inc. led us to develop FCStone Merchant Services, LLC. FCStone Merchant Services serves as a financing vehicle for a number of different commodities, including grain, energy products and renewable fuels. These arrangements can take the form of repurchase agreements or traditional lending arrangements, backed by letters of credit, depending on the risk, underlying commodity and borrower involved in the transaction.

We believe that our commodity risk management, merchandising and transportation expertise, along with our experience in the renewable fuels area, can be applied to the rapidly growing alternative fuels industry. Our presence in these markets and our interest in renewable fuels created an opportunity for us to provide financing to a startup biodiesel company. In fiscal 2006, we loaned $1.5 million to Green Diesel LLC as part of its financing to build a biodiesel production facility to be located in Houston, Texas. The loan included the issuance of warrants exercisable for 48% of the equity of Green Diesel. We have also committed to make available a $15 million line of credit to Green Diesel to be secured by all of its assets. The principal use of this line of credit will be to finance raw materials required for production of biodiesel and the storage, blending and sale of the final product. Our commitment is subject to satisfaction of certain conditions, the completion of due diligence and the negotiation of definitive terms acceptable to the parties. Subsequently, Green Diesel decided to raise additional equity in order to build a larger production facility with an annual production capacity of approximately 46 million gallons. In order for us to prevent the dilution of our potential 48% interest in Green Diesel, we invested an additional $2.4 million. We expect to loan an additional $600,000 to Green Diesel to finance the expanded facility. We are not contractually bound to invest additional equity in Green Diesel. We believe the Green Diesel production facility will begin commercial production in late 2006. We continue to explore other avenues to increase our presence in the renewable fuels area.

In fiscal 2005, the Financial Services segment represented approximately 4% of our consolidated income before minority interest, income tax and corporate overhead.

Grain Merchandising

As a complement to our commodity risk management consulting services, through our majority interest in FGDI we assist our customers and utilize our market contacts to merchandise physical grain. The primary role of FGDI is to link merchandisers of grain products through our network of industry contacts, serving as an intermediary to facilitate the purchase and sale of grain. We maintain a 70% equity interest in FGDI and AGREX, Inc., a subsidiary of Mitsubishi Corporation, holds the remaining 30% interest.

FGDI’s services help elevators and grain marketers maximize the value of their grain by locating domestic and international buyers and assisting the originator in retaining ownership and margins as far into the marketing pipeline as possible. We consistently offer value-added opportunities for our customers to merchandise their inventories beyond their traditional channels.

In the grain merchandising segment, FGDI earns revenue primarily through the sale of grain which is driven by the volume and price of grain we merchandise.

For the end-users, processors and exporters, FGDI provides a dedicated and efficient method of sourcing the specific type and quality of grain, and assures consistent delivery to match a buyer’s needs. Because FGDI works closely with a wide range of customers, we are able to regularly link customers in mutually beneficial transactions. We manage and operate approximately 1,000 grain rail cars in conjunction with our merchandising program. In fiscal 2005, we merchandised 258 million bushels of grain, of which more than 100 million where shipped through our leased facilities located at the port in Mobile, Alabama to the Asia market.

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In 2005, this segment was not profitable on the basis of income before minority interest, income tax and corporate overhead, and represented approximately (14%) of our consolidated income before minority interest, income tax and corporate overhead.

Risk Management

The clearing and execution of derivatives transactions, as well as the financing and merchandising of physical commodities, subjects us to a number of risks including (1) liquidity risk, (2) credit risk, (3) operating risk and (4) market risk. As a clearing FCM, we assume the responsibility to accurately report our customers’ transactions to the exchange and to remit, in a timely manner, the margin payments required by the exchange to support the transactions that have been executed on the exchange. This role requires us to carefully monitor our customers’ transactions and the amount of margin deposited into our customers’ accounts. Since the regulated derivative markets require investors to settle their gains and losses daily, we must ensure that our customers maintain the financial resources to meet the potential payment obligations. Similarly, we require deposits or other credit support for transactions for customers that transact with our OTC platform. Further, as a principal in the financing and merchandising of physical commodities, we must ensure that we maintain the resources and controls to finance lending transactions as well as the purchases of commodities in our merchandising activities.

Each of the specific risks associated with our business is discussed in more detail below:

Liquidity Risk

We require our customers to maintain cash or cash-equivalent assets on deposit in their accounts to meet their payment obligations in connection with the margining of futures and options transactions. However, in volatile markets, margin payments may exceed the amount of cash on deposit. Accordingly, we maintain policies and procedures to obtain additional funds from our customers in a timely fashion to mitigate this risk. Because there can be no assurance that a customer will fund these account deficits, for margin call purposes, we separately maintain lines of credit with various financial institutions to facilitate timely payments to the exchange clearinghouses, if required. As of May 31, 2006, this available amount was $66.75 million.

Separately, we maintain lines of credit that have been established for the purpose of financing our lending transactions as well as our commodity merchandising transactions. At May 31, 2006, we maintained lines of credit aggregating $305 million to support financing transactions and to facilitate commodity merchandising activities. While there is no guarantee that we will be able to replace current credit agreements when they expire, based on our strong liquidity position and new capital structure, we believe we will be able to do so.

Credit Risk

In the course of day-to-day transaction flows, we may be required to advance funds to the exchange clearinghouses in anticipation of receipt of customers’ segregated funds. This activity gives rise to credit risk in the event that our customers fail to meet their payment obligations. We have margin policies and monitoring procedures to protect us from such losses. We further mitigate the potential for such losses through the maintenance of escrow deposits from introducing brokers. Each of our risk management consultants is personally responsible for any customer losses and such losses are recouped through the withholding of commissions to the responsible consultant.

In our OTC activity, we transact contracts as principal with our customers, which we cover in back-to-back principal transactions with large financial institutions and professional market participants. These contracts subject us to the credit risk of our counterparties on each side. We manage the credit risk of our customer counterparties by taking deposits or obtaining other credit support. We manage the credit risk for our large counterparties by purchasing credit protection against such exposures. Similarly, we sometimes purchase credit protection against certain larger customer receivables arising from our grain merchandising transactions as well.

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Our financing transactions are generally secured by physical commodity inventories. We require that such inventories be hedged to protect our collateral positions against price risk. We maintain physical possession of the collateral documents evidencing our security interest in the financed commodities. Given the depth of the commodity markets, we are confident that realization values on our collateral will ordinarily be sufficient to repay our principal, but we are subject to the risk of insolvency of the issuer of the collateral documents and the resulting shortage of the underlying commodity.

Operational Risk

The execution and clearing of derivatives contracts traded on commodity exchanges involves a significant element of trade handling, input and reconciliation. Failure to effectively manage the potentially large volume of transactions can subject the firm to significant losses. This risk is mitigated by the daily reconciliation of transactions with each of the exchange clearinghouses and the continuous net settlement margining process. The effect of the increasing level of electronic trading has served to significantly reduce the degree of human intervention in such transactions. We expect that the trend towards increased electronic trading will have a positive effect on our trade processing and corresponding costs.

OTC transactions are specialized, individually negotiated contracts between two counterparties, which require proper documentation and management. Our business model requires that we match our customer OTC contracts with offsetting transactions with one of our counterparties. This process requires a substantial amount of transactional processing and review, and the record keeping associated with these transactions gives rise to risks in the event of errors or omissions.

Market Risk

We do not engage in any directional proprietary trading for our own account. All transactions in which we serve as a principal are offset with a customer or market counterparty. Any residual risk is hedged through the futures and options markets to comply with the position limits set forth in our risk management policy.

Competition

The commodity and risk management industry can generally be classified into four basic types of companies: (1) pure consultants, (2) clearing FCMs providing trade execution but not broad-based consulting services, (3) captive businesses providing consulting and trade execution as divisions of financial institutions or larger commodity-oriented companies, and (4) integrated FCMs providing both consulting and trade execution from an independent platform. As a result, we compete with a large number of smaller firms that focus on personalized service, and a smaller number of large, better capitalized companies that focus less on personalized service but have significant execution capabilities and market presence. We believe that our C&RM segment, which operates as an integrated FCM, serves the needs of middle market companies that require both the personalized consulting services provided by our risk management consultants and the trade execution services we offer as an FCM.

We compete with a large number of firms in the exchange-traded futures and options execution sector and in the OTC derivatives sector. We compete primarily on the basis of price and value of service. Our competitors in the exchange-traded futures and options sector include international brokerage firms, national brokerage firms, regional brokerage firms (both cooperatives and non-cooperatives) as well as local introducing brokers, with competition driven by price level and quality of service. Many of these competitors offer OTC trading programs as well. In addition, there are a number of financial firms and physical commodities firms that participate in the OTC markets, both directly in competition with us and indirectly through firms like us. We compete in the OTC market by making specialized OTC transactions available to our customers in contract sizes smaller than those usually available from major counter-parties.

In the Financial Services segment we compete with traditional lenders, including banks and asset-based lenders. In addition, we also compete with specialized investment groups that seek to earn an investment return

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based on commodities transactions. We compete on price and service and by managing commodity risks that traditional lenders may seek to avoid. We are an extremely small participant in the financial services industry, which consists of a very large number of large and small firms. We do not attempt to compete generally in this industry. Rather, we focus our energies on filling a specific niche of supporting commodities transactions.

The grain merchandising segment competes for both the purchase and sale of grain. Competition is intense and profit margins are low. Our major competitors have substantially greater financial resources than those available to us, but we believe that our relationships, primarily with cooperative customers, give us a broad origination capability. Competition for grain sales is based on price, services and ability to provide the desired quantity and quality of grains. Our grain merchandising operations compete with numerous larger grain merchandisers, including major grain merchandising companies such as Archer-Daniels-Midland Co., Cargill, Incorporated, CHS Inc., ConAgra Foods, Inc., Bunge Ltd., and Louis Dreyfus Group, each of which handles grain volumes of more than one billion bushels annually.

Technology

We utilize front-end electronic trading, mid office, back office and accounting systems that process transactions on a daily basis. These systems are integrated to provide recordkeeping, trade reporting to exchange clearing, internal risk controls, and reporting to government entities, corporate managers, risk managers and customers. Our futures back office system is maintained by a service bureau which is located in Chicago with a disaster recovery site in New York. All other systems are maintained in our West Des Moines headquarters data center and system backups are stored off-site.

All of these systems are accessed through a wide area network. All systems are protected by a firewall and require proper security authorization for access. Our wide area network is managed by a service bureau which has redundant data facilities in Kansas City. We are currently building a disaster recovery plan to utilize the West Des Moines and Kansas City data centers to house redundant systems.

Our risk managers access market information from network-based software systems. Market information includes real-time quotes, market history (futures/cash), news and commentaries. Market information also includes our historic database of market pricing and trend information used in the IRMP. This information is used to analyze the markets to help risk managers determine the best strategy for a customer to minimize risk and maximize profit margins, especially when used in conjunction with the IRMP.

We use the RISC back office trade system to process exchange-traded futures and options trades. We also use the KIODEX and a proprietary back office trade system to process OTC/derivative trades. We use Globex, Clearport, eAcess, CQ, Transact, TT, RANorder and PATS electronic trading/order routing platforms.

Employees

As of August 31, 2006, we employed 424 people. This total is broken down by business segment as follows: C&RM had 194 employees; Clearing and Execution Services had 114 employees; Grain Merchandising had 82 employees; Financial Services had 2 employees and Corporate had 32 employees. We believe our relationship with our employees is good, and we have not suffered any work stoppages or labor disputes. None of our employees operate under a collective bargaining agreement. Many of our employees are subject to employment agreements. It is our current policy to obtain an employment agreement containing noncompetition provisions from each risk management consultant.

Regulatory Matters

We are regulated by several governmental agencies and self-regulatory organizations in connection with various aspects of our business. Compliance with these laws and regulations is material to our operations. The following discussion describes the material licenses and registrations that we maintain.

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FCStone, LLC is a registered FCM with the CFTC and a member of the NFA both of which have regulatory authority over our company. FCStone, LLC is also a clearing member of all major U.S. futures exchanges. The CME is its Designated Self-Regulatory Organization for regulatory purposes and performs an annual examination of FCStone, LLC’s activities.

FCStone Investments, Inc., is registered as a commodity pool operator with the NFA and acts as the general partner of commodity pools. FCStone Advisory, Inc. is registered with the NFA as a commodity trading advisor and provides market commentary.

FCC Futures, Inc., and Westown Commodities, LLC, are guaranteed introducing brokers of FCStone, LLC registered with the NFA.

FCC Investments, Inc. is a registered broker-dealer with the Securities and Exchange Commission (“SEC”) and the National Association of Securities Dealers (“NASD”). FCC Investments, Inc. must file annual Financial and Operational Combined Uniform Single reports with the SEC and is subject to the various rules and regulations of the NASD.

FGDI is licensed as a grain dealer in Missouri, North Dakota, South Dakota, Nebraska, Minnesota, Indiana, Michigan, Ohio, Kentucky, Georgia, Alabama and Ontario, Canada. FGDI also has a Canadian Federal License for grain dealing. FGDI is registered as an exporter of grain with the United States Department of Agriculture.

In addition, we are subject to other general legal and regulatory provisions applicable to trading services and commodities dealing.

Properties and Locations

We lease office space for our principal business operations. Our corporate headquarters is located in West Des Moines, Iowa, and our leased space is approximately 18,600 square feet. This lease is in place until December 31, 2009. We have other offices in Chicago, Illinois; New York, New York; Kansas City, Missouri; St. Louis, Missouri; Omaha, Nebraska; Minneapolis, Minnesota; Bloomington, Illinois; Roy, Utah; Buford, Georgia; Indianapolis, Indiana; Spirit Lake, Iowa; Bowling Green, Ohio; Summit, New Jersey; Winnipeg, Canada; Blenheim, Canada; and Campinas, Brazil. We have established representative offices in Beijing and Dalian in the People’s Republic of China. All of our offices and other principal business properties are leased. We plan to relocate our corporate headquarters to Kansas City during 2007.

We have a major leased grain facility located at the port of Mobile, Alabama, and other leased grain facilities located in Indiana and Ontario, Canada. We own an additional facility located in Columbus Grove, Ohio.

The Mobile, Alabama facility consists of facilities for unloading rail shipments, temporary storage, and loading ocean-going vessels. The facility is leased from the State of Alabama for a term expiring December 1, 2012, under an agreement which is recognized as a capital lease for accounting purposes. Our obligations at Mobile are supported by an agreement with FGDI’s minority owner to purchase a minimum volume of grain through the facility.

Legal Proceedings

On August 21, 2003, August 21, 2003, September 23, 2003, October 16, 2003, and July 16, 2004, Euro-Maritime Chartering, Inc. filed five separate claims under the arbitration facility established by the London Maritime Arbitrators Association of London, England, alleging a breach by FGDI of charter party agreements regarding five vessels and seeking to recover damages of $242,655, $230,863, $769,302, $649,031 and $403,167, respectively. Euro-Maritime Chartering alleges that these damages arise from detention and demurrage

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encountered at China ports with respect to cargos that FGDI sold to Chinese buyers. FGDI does not dispute the demurrage claims, which are estimated to total approximately $690,000. FGDI claims that, under the sales contracts with the Chinese buyers, any detention and demurrage charges were for the account of the buyers. FGDI has collected deposits from the Chinese buyers in the total amount of $669,436, which are being held pending resolution of the detention claims. FGDI intends to vigorously defend the detention claims and believes that it has meritorious defenses. If the claimant prevails on any of the detention claims, or otherwise in amounts above the corresponding deposit, FGDI expects to seek collection of such amounts from the buyers.

On December 13, 2003, Liaoyang Edible Oils filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong alleging a breach of a sales contract by FGDI and seeking to recover damages of $1,125,000, of which $55,475 was not disputed as due under the contract. Liaoyang Edible Oils alleged that these damages arose out of disputes related to the final pricing of the contract. On December 15, 2005 the arbitration panel rendered a decision, dismissing the claim for pricing damages, but also doing its own accounting under the contract, and making an award to claimant, including interest and arbitration costs, of approximately $275,000. A partial award of attorneys’ fees and costs was also rendered in the decision, although this amount is yet to be quantified. FGDI has made an accrual related to this claim. On January 25, 2006, the claimant filed an appeal, which under the arbitration rules governing this dispute, is deemed to be a request for a new hearing. FGDI intends to defend the appeal and seek an order that the award be upheld in its entirety, except for the accounting amount and except that each party should be ordered to bear its own legal costs. In addition, FGDI has cross appealed as to the amount determined by the arbitration panel.

On October 15, 2004, after major construction on the expansion of FGDI’s grain facility located in Mobile, Alabama was complete, but before acceptance of the project, the foundation of one of the four bins subsided during initial bin filling operations, causing significant damage to the affected bin, its foundation and other structures. Negotiations for recovery and remediation with potentially responsible parties have been undertaken. In November 2005, a claim for certain resulting damage to the facility against FDGI’s own insurer was settled for $570,500. We expect to use these funds to cover expected costs in repairing equipment that was damaged. Such settlement does not cover the damage to the underlying foundation, the costs of remediating any foundation defects, or loss of use or other consequential damages. Negotiation has failed to resolve the issues with other responsible parties, and FGDI has commenced a lawsuit in state court in Mobile, Alabama to recover remediation costs, loss of use damages and other damages. FGDI intends to vigorously pursue such litigation to seek a full recovery of all of its damages.

On December 9, 2004, Xiamen Zhonge Industry Co., Ltd. (Xiamen) filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong. Xiamen’s claim alleges that FGDI breached its duty to accept pricing instructions provided by Xiamen to FGDI. FGDI submitted a statement of defense and counterclaim to which Xiamen replied with a modified claim. The matter is now fully submitted and is awaiting decision.

On May 23, 2006, a former customer, Watseka Farmers Grain Cooperative Company, filed an action in the United States District Court, Central District of Illinois seeking actual damages, interest, punitive damages and general relief relating to losses on allegedly improper speculative trades ordered by the former general manager of the customer in a commodity futures account at FCStone, LLC. The customer was placed under supervision by Illinois state authorities in May 2004, after examination revealed deficiencies in its financial reporting and condition, and its assets were subsequently sold. We intend to vigorously defend this claim.

We are currently unable to predict the outcome of these claims and, with the exception of the claim in which an arbitration panel has rendered a decision, believes their current status does not warrant accrual under the guidance of Statement on Financial Accounting Standards No. 5, Accounting for Contingencies, since the amount of any liability is neither probable nor reasonably estimable. As such, with the exception of the amount recorded as a result of the arbitration panel’s decision and the accounts receivable charged to bad debt expense, no

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amounts have been accrued in the financial statements. We intend to vigorously defend the claims against us and will continue to monitor the results of arbitration and assess the need for future accruals.

From time to time and in the ordinary course of our business, we are a plaintiff or are a defendant in other legal proceedings related to various issues, including worker’s compensation claims, tort claims, contractual disputes and collections. With the exception of the matters discussed above, we are not aware of other potential claims that could result in the commencement of material legal proceedings. We carry insurance that provides protection against certain types of claims, up to the policy limits of our insurance. In the opinion of our management, liabilities, if any, arising from existing litigation and claims will not have a material effect on our earnings, financial position or liquidity.

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MANAGEMENT

Executive Officers and Members of the Board of Directors

Our business and affairs are governed by its board of directors. The board of directors currently consists of ten directors. The board of directors has full authority to act on behalf of our company. The board of directors acts collectively through meetings, committees and executive officers it appoints. In addition, we employ a staff of executives to manage our day-to-day operations. The members of our board of directors and our executive officers are identified below.

Name	Age	Position	Term Expires After Fiscal
Paul G. (Pete) Anderson	53	President and Chief Executive Officer	—
Stephan Gutierrez	55	Executive Vice President and Chief Operating Officer	—
Jeff Soman	55	Executive Vice President of FCStone, LLC	—
Robert V. Johnson	57	Executive Vice President and Chief Financial Officer	—
Steven J. Speck	47	President and Chief Executive Officer of FGDI, LLC	—
Bruce Krehbiel(1) (2)	53	Chairman of the Board, Director	2008
Jack Friedman(1)	49	Vice Chairman, Director	2007
Eric Parthemore(1)(2)	57	Secretary, Treasurer, Director	2007
Rolland Svoboda	47	Director	2006
Tom Leiting	51	Director	2008
Brent Bunte(2)	49	Director	2008
Dave Reinders	50	Director	2006
David Andresen	52	Director	2007
Doug Derscheid	57	Director	2008
Kenneth Hahn	54	Director	2006

(1) Executive Committee and Compensation Committee member

(2) Audit Committee member

Pete Anderson has been employed by our company since 1987 and has served as President and CEO since 1999. Prior to becoming president, Mr. Anderson was the Vice President of Operations. Mr. Anderson is the past president of the Kansas Cooperative Council and past founding chairman of the Arthur Capper Cooperative Center at Kansas State University. Mr. Anderson sits on the board of directors of Associated Benefits Corporation and is a member of National Council of Farmer Cooperatives, the National Feed and Grain Association and several other state associations.

Stephan Gutierrez has been employed as Executive Vice President and Chief Operating Officer of the company since 2002. He also serves as president of our subsidiary, FCStone Trading, LLC. Prior to his positions with FCStone, Mr. Gutierrez worked at Cargill as a trader and trading manager. Mr. Gutierrez has 31 years of experience in trading, risk and asset management with respect to multiple commodities.

Jeff Soman has been employed as Executive Vice President of FCStone, LLC since 2000. Mr. Soman has over 26 years of experience managing the clearing, internal risk management and brokerage facilities of several major brokerage firms. During the last 15 years he has worked in this capacity for FCStone, LLC or one of its predecessor companies.

Robert V. Johnson has been employed as our Chief Financial Officer since 1987. Mr. Johnson previously was the corporate controller for Heritage Communications, Inc. a publicly-traded cable television company. Mr. Johnson is a member of Financial Executives International, the Iowa Society of CPAs and the American Institute of CPAs.

Steven Speck has served as the President and CEO of FGDI since 2001. Prior to 2001 he served as our Vice President-Specialty Crops of for nine years.

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Bruce Krehbiel has served as a director since 1988 and is our Chairman. Mr. Krehbiel is the manager of the Kanza Cooperative Association in Iuka, Kansas, and he has worked for the Kanza Cooperative since 1986. Mr. Krehbiel has held director positions on the boards of the Midwest Chapter of the National Society of Accountants for Cooperatives, CenKan, LLC, and Agri-Business Benefit Group.

Jack Friedman has served as a director since 1996 and is our Vice Chairman. Mr. Friedman is the manager of Innovative Ag Services in Monticello, Iowa and has been with that firm or its predecessor company for 30 years. For the past 14 years, Mr. Friedman had served as manager of Swiss Valley Ag Center in Monticello, Iowa. Mr. Friedman has held directorships on the following boards: Iowa Institute of Cooperatives, Industrial Telecommunications Association Board and the Land O’Lakes Feed Advisory Council. He currently serves on the board of the Dyersville Planning and Zoning Board.

Eric Parthemore has served as a director since 1996 and is our Secretary and Treasurer. Mr. Parthemore is the president and chief executive officer of the Farmers Commission Company in Upper Sandusky, Ohio and has held that position since 1996. For the previous five years, he was the general manager of U.S. Commission Company. Mr. Parthemore is currently a member of the Ohio Agricultural Economic Development Council and was appointed in January 2004 to serve on the Ohio Agricultural Commodity Advisory Commission by the Secretary of Agriculture in the State of Ohio. Mr. Parthemore is a director on the Ohio AgriBusiness Association and serves as a trustee of the OABA Education Trust.

Rolland Svoboda previously served as a director from January 1999 to January 2002 and is currently serving a term as director that commenced in January 2004. Mr. Svoboda is the general manager of Pro Cooperative in Gilmore City, Iowa. He has been with Pro Cooperative since 1999. Prior to his current position, Mr. Svoboda served for five years as the general manager of Farmers Coop in Hemingford, Nebraska.

Tom Leiting has served as a director since 1997. Mr. Leiting is the manager of the River Valley Cooperative in Clarence, Iowa. He has been employed by River Valley or one of its parent companies for the past 19 years. Prior to his position with River Valley, Mr. Leiting was employed by Swiss Valley Farms Services for eight years. Mr. Leiting is currently chairman of the Associated Benefits Corporation Board of Directors. He is an advisory committee member for Land O’Lakes.

Brent Bunte has served as a director since 2000 and is the chairman of the audit committee. Mr. Bunte is the manager of the NEW Cooperative in Fort Dodge, Iowa, and has been with NEW Cooperative for 22 years. Mr. Bunte has held directorships with First American Bank and Associated Benefits Corporation.

Dave Reinders has served as a director since 2001. Mr. Reinders is the general manager of Sunray Co-op in Sunray, Texas and has held that position since January 2004. Prior to his service at Sunray Co-op, Mr. Reinders was general manager of United Farmers Coop in George, Iowa, for ten years. Mr. Reinders was formerly a director of the Iowa Institute of Coops, the Agribusiness Association of Iowa and Land O’Lakes.

David Andresen has served as a director since January 6, 2005. Mr. Andresen is the general manager of 4 Seasons Cooperative and Petroleum Partners LLC in Britton, South Dakota and has served in that capacity for nine years. Mr. Andresen has served as the President of the South Dakota Managers Association, South Dakota Association of Cooperatives, Britton Area Chamber of Commerce and is currently the mayor of Britton, South Dakota.

Doug Derscheid has served as a director since 2003. Mr. Derscheid is the President and CEO of the Central Valley Ag Cooperative in O’Neill, Nebraska and has been with Central Valley, and one of its predecessors, Central Farmers Cooperative, for the past 15 years. Prior to his work with Central Farmers, Mr. Derscheid was the general manager of Farmers Cooperative Elevator in Plymouth, Nebraska for seven years. Mr. Derscheid is currently Chairman of the Board of Cooperative Mutual Insurance Company and is the treasurer for the O’Neill Airport Authority. Mr. Derscheid has been a board member of the Nebraska Propane Gas Association and a Trustee for the Nebraska Managers Association.

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Kenneth Hahn has served as a director since 2002. Mr. Hahn is the general manager of Planters Cooperative in Lone Wolf, Oklahoma and has been with Planters Cooperative for a total of 32 years, 24 years as manager and 8 years as assistant manager. Mr. Hahn has held director positions with the Coop Retirement Board, Oklahoma Coop Ginners Board, and Oklahoma Grain and Feed Association.

Our Board of Directors

Our board currently consists of ten persons, each of whom satisfies the independence requirements of the NASDAQ Global Market. There are no family relationships among any of our directors or executive officers.

Our certificate of incorporation provides that our board of directors is divided into three classes with staggered terms. The term of office of directors assigned to Class I will expire at the annual meeting of stockholders following the end of fiscal year 2006 and at each third succeeding year thereafter. The term of office of directors assigned to Class II will expire at the annual meeting of stockholders following the end of fiscal year 2007 and at each third succeeding annual meeting thereafter. The term of office of directors assigned to Class III will expire at the annual meeting of stockholders following the end of fiscal year 2008 and at each third succeeding annual meeting thereafter. Messrs. Svoboda, Reinders and Hahn are Class I directors, Messrs. Parthemore, Friedman and Andresen serve as Class II directors and Messrs. Krehbiel, Leiting, Bunte and Derscheid will serve as Class III directors.

This classification of the board of directors may delay or prevent a change of control of our company or in our management. See “Description of Capital Stock—Other Certificate of Incorporation and Bylaws Provisions.”

Our board of directors has the power to appoint officers. Each officer will hold office for the term determined by the board of directors and until such person’s successor is chosen and qualified or until such person’s resignation, removal or death.

Committees of the Board

Members of the Executive Committee, Audit Committee and Compensation Committee serve at the pleasure of the Board of Directors.

Executive Committee. The Executive Committee of the Board of Directors consists of the Chairman of the Board, the Vice Chairman and the board member serving as Secretary and Treasurer. The Executive Committee is empowered to exercise certain powers of the full board between regular meetings.

Audit Committee. The Audit Committee is responsible for reviewing our financial statements, audit reports, internal financial controls and the services performed by the independent registered public accounting firm, and for making recommendations with respect to those matters to the Board of Directors. Currently, Brent Bunte is chairman of the Audit Committee. The Audit Committee does not have a member who qualifies as an “audit committee financial expert” within the meaning of that term as defined by the SEC pursuant to Section 407 of the Sarbanes-Oxley Act of 2002 because none of the members of the Board of Directors elected by the Stockholders qualifies. Prior to the consummation of this offering, we plan to add at least one additional independent director who will qualify as an “audit committee financial expert” under the NASDAQ Global Market requirements. Each member of the Audit Committee is independent as defined by NASDAQ’s independence standards.

Compensation Committee. The Compensation Committee is responsible for reviewing and making recommendations to the Board of Directors with respect to compensation of executive officers, other compensation matters and awards. Currently, Bruce Krehbiel is chairman of the Executive and Compensation Committees.

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Nominating Committee. The Board of Directors does not have a standing nominating committee. Each member of the Board of Directors participates in the consideration of director nominees. Because each member of the Board of Directors is independent as defined by NASDAQ’s independence standards, the Board believes that a standing nominating committee is not necessary.

Code of Ethics

We have adopted a code of professional ethics for all employees and directors of our company.

Compensation of Directors

Members of the board of directors receive a quarterly retainer of $2,500 and a per diem payment of $500 for each activity on behalf of our company, as well as direct reimbursement of travel expenses related to service on the board of directors. The board chairman receives an additional $2,500 per quarter retainer and the two other executive committee members and audit committee chairman receive an additional $1,250 per quarter.

Compensation Committee Interlocks and Insider Participation

During the last completed fiscal year, Messrs. Krehbiel, Parthemore and Friedman served on the Compensation Committee. None of the members of our Compensation Committee is currently or was formerly a company officer or employee. There are no compensation committee interlocks and no insider participation in compensation decisions that are required to be reported under the rules and regulations of the Securities Exchange Act of 1934, as amended.

Executive Compensation

The following summary compensation table summarizes compensation information with respect to our Chief Executive Officer and our four other most highly compensated executive officers for our most recent fiscal year. In this Prospectus, these individuals are referred to as our “named executive officers.”

Summary Compensation Table

Name and Principal Position	Fiscal     Year	Salary ($)		Bonus ($)		Other Annual Compensation ($)(1)
Paul G. (Pete) Anderson, President & Chief Executive Officer	2005 2004	320,000 320,000	(2)	442,560 365,128	(3) (3)	—
Stephan Gutierrez, Executive Vice President & Chief Operating Officer	2005 2004	225,000 174,583		311,022 209,935	(4)(5) (4)(5)	—
Steve Speck, President & Chief Financial Officer—FGDI	2005 2004	175,000 175,000		38,547 221,423	(5)(6) (5)(6)	—
Jeff Soman, Executive Vice President—FCStone, LLC	2005 2004	165,000 165,000		188,007 163,567	(5)(7) (5)(7)	—
Robert V. Johnson, Executive Vice President & Chief Financial Officer	2005 2004	165,000 145,000		188,007 143,740	(5)(8) (5)(8)	—

(1) None of the perquisites or other benefits paid exceeded the lesser of $50,000 or 10% of the total annual salary and bonus received by the executive.

(2) As of September 1, 2005, Mr. Anderson’s salary was increased to $350,000 annually.

(3) Represents $391,583 and $339,847 paid under the Executive Short-Term Management Incentive Plan and $50,977 and $25,281 awarded under the deferred compensation provisions for fiscal years 2005 and 2004, respectively, as provided for in Mr. Anderson’s employment agreement.

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(4) Represents $275,332 and $185,411 paid under the Executive Short-Term Management Incentive Plan and $35,690 and $24,524 awarded under the Mutual Commitment Compensation Plan for fiscal years 2005 and 2004, respectively.

(5) Bonuses awarded under the Mutual Commitment Compensation Plan vest at the end of the fifth year after the bonus was awarded. Participants receive 50% of the vested amount in his or her account in cash following the end of every plan year.

(6) Represents $38,547 and $31,909 awarded under the Mutual Commitment Compensation Plan for fiscal years 2005 and 2004, respectively, and $189,514 paid under the FGDI CEO Short-Term Incentive Plan for fiscal year 2004.

(7) Represents $161,834 and $140,389 paid under the Executive Short-Term Management Incentive Plan and $26,173 and $23,178 awarded under the Mutual Commitment Compensation Plan for fiscal years 2005 and 2004, respectively.

(8) Represents $161,834 and $123,372 paid under the Executive Short-Term Management Incentive Plan and $26,173 and $20,368 awarded under the Mutual Commitment Compensation Plan for fiscal years 2005 and 2004, respectively.

Stock Option Grants in Last Fiscal Year

There were no options granted to our named executive officers in fiscal year 2005. On June 13, 2006, we granted 320,000 options to our officers and management and 80,000 options to non-employee directors, at an exercise price of $24.76 per share.

Employment Agreements

CEO Agreement. We and Paul G. (Pete) Anderson, our Chief Executive Officer, or CEO, have entered into a new employment agreement, dated September 1, 2005, with a three-year term ending August 31, 2008 The material terms include a three-year term, a minimum base salary of $350,000, a covenant not to compete and bonus and benefits as provided under the previous agreement, dated February 22, 2002. Mr. Anderson’s employment will become “at will” as of September 1, 2008. Under the previous agreement and the new agreement, the CEO’s employment may be terminated by our company for cause, by the CEO for good reason, or upon the death of the CEO. Mr. Anderson receives a base salary which is determined annually by the executive committee of the Board of Directors and participates in a short-term incentive plan which provides for his annual bonus. The agreement also provides that Mr. Anderson be paid deferred compensation in the amount of 15% of the annual bonus paid to the CEO. Each annual contribution to the deferred compensation plan vests over a period of 5 years. If Mr. Anderson leaves our company for any reason other than total disability, death or retirement, he loses the right to any unvested portion of the deferred compensation. Upon the termination of the agreement, Mr. Anderson retains no right to his annual salary or bonus, he only retains the right to the vested portion of his deferred compensation plan. There is no provision of the agreement that provides for any other severance payments to the CEO upon termination of the agreement. However, the CEO is entitled to the benefits of our change of control policy, which provides for a three-year continuation of compensation, benefits and perquisites if, after a change of control, the CEO is terminated by our company or its successor (except for cause) or the CEO terminates employment after a diminution of duties, reduction in the level of compensation, benefits or perquisites, or change of location or more than 50 miles.

Agreements with Other Executive Officers. All of our other named executive officers have signed agreements that provide that their employment is “at will.” These agreements may be terminated at any time and we are not obligated to make severance payments to any of these officers. The agreements contain a non-competition provision that runs for periods ranging from one year to eighteen months after termination. These named executive officers are also entitled to the benefits of our change of control policy, which provides for a two-year continuation of compensation, benefits and perquisites if, after a change of control, the executive officer is terminated by us or our successor (except for cause) or the executive officer terminates employment after a diminution of duties, reduction in the level of compensation, benefits or perquisites, or change of location of more than 50 miles.

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Long-Term Incentive Plan

The FCStone Group, Inc. Long-Term Incentive Plan covered the five named executive officers listed in the Summary Compensation Table from September 1, 2003 through August 31, 2006. The Plan provided for awards to the covered officers at the end of the expected five-year life cycle of the Plan. These potential awards were based on increases in the defined equity, plus common and preferred stock redemptions, less stock issued, and after patronage distribution and a portion of dividends paid, tax and accrual for award, over the intended five-year life of the Plan. The threshold level of increase was a compounded 11% return on equity, at which point the participants were eligible to receive an award equal to 50% of their base salary at the beginning of the expected five-year life of the Plan. At the threshold level, the total award to the five participants would be equal to 2.0% of the increase in the defined equity. As the defined equity increased over the threshold level, the total awards increased as a percentage of the increase in defined equity until the maximum level, which was based on a compounded 16% compounded return on equity, was reached. At the maximum level after five years, the participants were eligible to receive an award equal to 200% of their base salary at the beginning of the Plan, which represented 4.9% of the increase in defined equity over the life of the Plan.

The Plan was administered by the Chairman of the Board, who retained the discretion to amend or terminate the Plan.

The chairman and the board have decided to terminate this plan effective as of August 31, 2006, the end of the 2006 fiscal year. The participants are eligible for prorated awards because the Plan was terminated before the completion of the five-year life cycle. The prorated awards are based on the level of performance attained at the termination of the Plan and are payable immediately following the termination of the Plan. In the year ended August 31, 2005, we incurred no expense for the Plan, and made no payments to any participants under the Plan. We will pay out any prorated awards resulting from the termination of the Plan subsequent to August 31, 2006. The maximum award will be limited to 120% of each participant’s base salary at the beginning of the plan.

2006 Equity Incentive Equity Plan

We have adopted the 2006 Equity Incentive Equity Plan (the “Equity Plan”) for the purpose of encouraging employees of our company, its affiliates and subsidiaries to acquire a proprietary and vested interest in the growth and performance of our company. The Equity Plan also is designed to assist our company in attracting and retaining employees and non-employee directors by providing them with the opportunity to participate in the success and profitability of our company. Equity-based awards also are intended to further align the interests of award recipients and with the interests of our stockholders.

Eligible Participants. The eligible participants in the Equity Plan are all key employees of our company, its affiliates and its subsidiaries whose judgment, initiative and efforts is important to the successful conduct of our business, including employees who are officers or members of our board of directors, and members of our board who are not employees of our company. Currently, there are approximately 424 officers and employees of our company, its affiliates and its subsidiaries.

Equity Plan Administration. The Equity Plan may be administered by our board of directors or a committee consisting of two or more directors. The Executive Committee of our board of directors currently administers the Equity Plan and has the sole discretion to administer and interpret the Equity Plan and determine who will be granted awards under the Equity Plan, the size and types of such awards and the terms and conditions of such awards.

Shares Subject to the Equity Plan. The Equity Plan permits the issuance of up to 750,000 shares of our common stock pursuant to awards granted under the Equity Plan such as stock options, restricted stock awards, restricted stock units and performance share awards, as well as awards such as stock appreciation rights, and performance unit and performance share awards payable in the form of common stock or cash.

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Stock Options. Both incentive stock options and nonqualified stock options may be granted under the Equity Plan. The per-share exercise price of an option is set by the Committee and generally may not be less than the fair market value of a share of our common stock on the date of grant. Options granted under the Equity Plan are exercisable at the times and on the terms established by the Committee. The maximum term of an option is ten years from the date of grant.

Stock Appreciation Rights. A stock appreciation right or “SAR” is the right to receive payment of an amount equal to the excess of the fair market value of a share of common stock on the date of exercise of the stock appreciation right over the grant price of the stock appreciation right. The Equity Plan permits the grant of two types of SARs: freestanding SARs, tandem SARs, or any combination of the two. A freestanding SAR is a SAR that is granted independently of any stock option. A tandem SAR is a SAR that is granted in connection with a related stock option, the exercise of which requires a forfeiture of the right to purchase a share under the related option (and when a share is purchased under the option, the SAR is similarly canceled). The Committee has complete discretion to determine the number of SARs granted to any participant and the terms and conditions pertaining to such SARs.

Restricted Stock and Restricted Stock Unit Grants. The Equity Plan permits the grant of restricted stock or restricted stock unit awards. Restricted stock and restricted stock units may be issued or transferred for consideration or for no consideration, as determined by the Committee. The Committee may establish conditions under which restrictions on shares of restricted stock or restricted stock units lapse over a period of time or according to such other criteria as the Committee deems appropriate, including the achievement of specific performance goals.

Performance Unit and Performance Shares. The Equity Plan permits the grant of performance units and performance share awards which are bonuses payable in cash, common stock or a combination thereof. Each performance unit and performance share will represent the right of the participant to receive an amount based on the value of the performance unit/share, if performance goals established by the Committee are met. A performance unit will have a value based on such measurements or criteria as the Committee determines. A performance share will have a value equal to the fair market value of a share of our company common stock. When an award of these are granted, the Committee will establish a performance period during which performance will be measured. At the end of each performance period, the Committee will determine to what extent the performance goals and other conditions of the performance units/shares are met.

Restrictions on Transfer. Awards under the Equity Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution and generally are exercisable, during the recipient’s lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s beneficiary or representative.

Changes in Capital or Corporate Structure. If, without the receipt of consideration by our company, there is any change in the number or kind of shares of our common stock outstanding by reason of a stock dividend or any other distribution upon the shares payable in stock, or through a stock split, subdivision, consolidation, combination, reclassification or recapitalization, the maximum number of shares of our common stock available for grants, the maximum number of shares of our common stock that any individual participating in the Equity Plan may be granted in any year, and the number of shares covered by outstanding grants may be appropriately adjusted by the Committee to reflect any increase or decrease in the number of issued shares of our common stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such grants. Any fractional shares resulting from such adjustment will be eliminated. Adjustments determined by the Committee are final, binding and conclusive.

If our company undergoes a “change of control,” as that term is defined in the Equity Plan, each option, share of restricted stock and other grant held by a non-employee director will, without regard to any vesting schedule, restriction or performance target, automatically become fully exercisable or payable, as the case may be, as of the date of the change of control.

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Pension Plan

We have a noncontributory defined benefit pension plan. The following table shows the approximate annual retirement benefits that participating executive officers are expected to receive under the plan based on their pay and years of credited service.

	Years of Service
Remuneration 5 Year Average	10		15		20		25		30		35
$125,000	$	15,625	$	23,438	$	31,250	$	39,063	$	46,875	$	54,688
$150,000	$	18,750	$	28,125	$	37,500	$	46,875	$	56,250	$	65,625
$175,000	$	21,875	$	32,813	$	43,750	$	54,688	$	65,625	$	76,563
$200,000	$	25,000	$	37,500	$	50,000	$	62,500	$	75,000	$	87,500
$225,000	$	28,125	$	42,188	$	56,250	$	70,313	$	84,375	$	98,438
$250,000	$	31,250	$	46,875	$	62,500	$	78,125	$	93,750	$	109,375
$300,000	$	37,500	$	56,250	$	75,000	$	93,750	$	112,500	$	131,250
$400,000	$	50,000	$	75,000	$	100,000	$	125,000	$	150,000	$	175,000
$500,000	$	62,500	$	93,756	$	125,000	$	156,250	$	187,500	$	218,750

Our defined benefit pension plan covers all compensation subject to the regulatory limit of annual compensation, which for 2005 was $210,000. The Chief Executive Officer and Chief Financial Officer also have a supplementary non-qualified pension plan that has the same provisions as the defined benefit pension plan except that it covers all compensation above the regulatory limit.

The estimated current credited years of service for each executive officer are as follows: Paul G. (Pete) Anderson-19 years; Steve Speck-15 years; Stephan Gutierrez-4 years; Jeff Soman-6 years; and Robert Johnson-25 years.

Above benefits are based on a straight-life annuity and are not subject to any Social Security or other offsets.

The monthly benefit formula for our defined benefit pension plan is 1.25% times the highest consecutive 5 year average monthly earnings times the number of years of credited service.

Directors’ and Officers’ Insurance

We currently maintain a directors’ and officers’ liability insurance policy that provides our directors and officers with liability coverage relating to certain potential liabilities.

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PRINCIPAL STOCKHOLDERS

The table below sets forth information, as of August 31, 2006 (unless otherwise indicated below), with respect to the beneficial ownership of shares of Common Stock by: (a) each person known to us to own beneficially more than 5% of the aggregate shares of Common Stock outstanding, (b) each director and director nominee, (c) each named executive officer in the Summary Compensation Table, and (d) the executive officers and directors of our company as a group. Each of the persons, or group of persons, in the table below has sole voting power and sole dispositive power as to all of the shares of Common Stock shown as beneficially owned by them, except as otherwise indicated.

Name of Beneficial Owner	Number of Shares and Nature of Beneficial Ownership	Percent of Shares Outstanding
Principal Stockholders:
FCStone Group Employee Stock Ownership Plan(1)	466,149	9.6	%
Directors and Executive Officers:
Directors:
Brent Bunte(2)	96,488	2.0	%
Jack Friedman(3)	70,719	1.5	%
Bruce Krehbiel(4)	72,718	1.5	%
Tom Leiting(5)	40,456	*
Eric Parthemore(6)	24,858	*
Dave Reinders(7)	106,254	2.2	%
Rolland Svoboda(8)	54,730	1.1	%
Doug Derscheid(9)	78,386	1.6	%
Dave Andresen(10)	14,095	*
Kenneth Hahn(11)	30,083	*
Executive Officers:
Paul G. Anderson(12)	106,870	2.2	%
Steve Speck	0	0
Stephen Gutierrez(13)	38,347	*
Jeff Soman(14)	41,956	*
Robert V. Johnson(15)	58,075	1.2
All directors and executive officers as a group (15 persons)	544,035	11.2	%

* Signifies less than 1%

(1) The address of the FCStone Group Employee Stock Ownership Plan is 2829 Westown Parkway, Suite 200, West Des Moines, Iowa 50266.

(2) Represents options to purchase 8,000 shares of our common stock, which are currently exercisable and 88,488 shares held by NEW Cooperative, of which Mr. Bunte is Manager.

(3) Represents options to purchase 10,800 shares of our common stock, which are currently exercisable and 59,919 shares held by Innovative Ag Services, of which Mr. Friedman is Manager.

(4) Represents options to purchase 14,400 shares of our common stock, which are currently exercisable and 58,318 shares held by Kanza Cooperative Association, of which Mr. Krehbiel is Manager.

(5) Represents options to purchase 8,000 shares of our common stock, which are currently exercisable and 32,456 shares held by River Valley Cooperative, of which Mr. Leiting is Manager.

(6) Represents options to purchase 10,800 shares of our common stock, which are currently exercisable and 14,058 shares held by The Farmers Commission Company, of which Mr. Parthemore is President and CEO.

(7) Represents options to purchase 8,000 shares of our common stock, which are currently exercisable and 98,254 shares held by Sunray Coop, of which Mr. Reinders is General Manager.

(8) Represents options to purchase 8,000 shares of our common stock, which are currently exercisable and 46,730 shares held by Pro Cooperative, of which Mr. Svoboda is General Manager.

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(9) Represents options to purchase 4,000 shares of our common stock, which are currently exercisable and 74,386 shares held by Central Valley Ag Cooperative, of which Mr. Derscheid is President and CEO.

(10) Represents options to purchase 4,000 shares of our common stock, which are currently exercisable and 10,095 shares held by 4 Seasons Cooperative, of which Mr. Andresen is General Manager.

(11) Represents options to purchase 4,000 shares of our common stock, which are currently exercisable and 26,083 shares held by Planters Cooperative, of which Mr. Hahn is Manager.

(12) Represents options to purchase 95,000 shares of our common stock, which are currently exercisable and 11,870 shares held in an Employee Stock Ownership Plan account.

(13) Represents options to purchase 35,000 shares of our common stock, which are currently exercisable and 3,347 shares held in an Employee Stock Ownership Plan account.

(14) Represents options to purchase 35,000 shares of our common stock, which are currently exercisable and 6,956 shares held in an Employee Stock Ownership Plan account.

(15) Represents options to purchase 45,000 shares of our common stock, which are currently exercisable and 13,075 shares held in an Employee Stock Ownership Plan account.

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CERTAIN RELATIONSHIPS

Each of our directors is an executive officer of a cooperative that is a stockholder. Each of these cooperatives uses our services. The following table sets forth the amounts paid by these cooperatives for our services during our fiscal year ended August 31, 2005.

Board Member	Board Member’s Cooperative	Amounts Paid by Cooperative to Us for Services
Brent Bunte	NEW Cooperative	$	113,258
Jack Friedman	Innovative Ag Services		74,350
Bruce Krehbiel	Kanza Cooperative Association		93,456
Tom Leiting	River Valley Cooperative		113,169
Eric Parthemore	Farmers Commission Company		47,734
Dave Reinders	Sunray Co-op		127,643
Rolland Svoboda	Pro Cooperative		133,892
Doug Derscheid	Central Valley Ag Cooperative		128,095
David Andresen	4 Seasons Cooperative		34,013
Kenneth Hahn	Planters Cooperative		169,615

Our policy is that all transactions between us and our officers, directors and/or five percent stockholders will be on terms no more favorable to those related parties than the terms provided to our other customers.

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DESCRIPTION OF CAPITAL STOCK

Prior to the sale of the common stock offered by this prospectus, we intend to reincorporate in the state of Delaware pursuant to a merger of FCStone Group, Inc. with its newly-formed, wholly-owned subsidiary, New FCStone, Inc. New FCStone, Inc. will be the surviving corporation in the merger and its certificate of incorporation and bylaws will remain in effect in their current forms except that its name will be changed to FCStone Group, Inc. Accordingly, the rights of stockholders after the reincorporation will be governed by Delaware law and the certificate of incorporation and bylaws of the surviving Delaware corporation. We describe generally below the material terms of our capital stock, certificate of incorporation and bylaws after giving effect to the reincorporation. However, this description is not complete. For a complete description of the terms of our capital stock, certificate of incorporation and bylaws, we refer you to the certificate of incorporation and bylaws of New FCStone, Inc., which are included as exhibits to the registration statement of which this prospectus forms a part. We urge you to read those documents carefully before making a decision to invest in the common stock.

Authorized Capital Stock

The certificate of incorporation after our reincorporation will provide for an authorized capital structure consisting of:

• 40 million authorized shares of common stock, including:

• 10 million authorized shares of common stock,

• 10 million authorized shares of Series 1 common stock,

• 10 million authorized shares of Series 2 common stock, and

• 10 million authorized shares of Series 3 common stock, and

• 20 million authorized shares of preferred stock.

Immediately prior to the offering, there will be              shares of common stock,              shares of Series 1 common stock,              shares of Series 2 common stock, and              shares of Series 3 common stock. Our existing shareholders, except for                     , will each hold only Series 1, 2 and 3 common stock in proportion to their holdings immediately prior to the restructuring. The shares of common stock, including the shares of Series 1, 2 and 3 common stock, are identical, except that the shares of Series 1, 2, and 3 common stock are subject to transfer restrictions and the transfer restrictions associated with each series have a different duration. There will be              shares of common stock outstanding upon completion of this offering, assuming no exercise of the underwriters’ over-allotment option, which amount includes a total of              shares of common stock that we expect to grant to our management and directors upon completion of this offering. Not all of the authorized shares will be issued. There are no other shares of common stock or preferred stock issued and outstanding prior to the offering. The board of directors will have the authority to issue additional shares of common stock or preferred stock. We will issue pursuant to the offering a number of shares of common stock necessary to complete the offering.

Common Stock

General

The common stock, including the Series 1, 2 and 3 common stock, represent equity interests in our company and generally have traditional features of common stock, including dividend, voting and liquidation rights. The common stock may be issued as a single class, without series. When we use the term “common stock” in this prospectus, we are referring to the common stock of all classes and series, including the Series 1, 2 and 3 common stock. The common stock to be issued in this offering is not Series 1, 2 or 3, and is not subject to the transfer restrictions applicable to those series of common stock. See “—Transfer Restrictions.”

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Dividends

Subject to the limitations under Delaware corporation law and any preferential dividend rights of outstanding preferred stock, holders of common stock are entitled to receive their pro rata share of such dividends or other distributions as may be declared by our board of directors out of funds legally available therefor.

General Voting Rights

Unless otherwise required by our certificate of incorporation or applicable law, holders of common stock are entitled to one vote per share with respect to all matters upon which our stockholders of the company are entitled to vote generally, including amendments to the certificate of incorporation, mergers, sales of all or substantially all of the corporate assets or property or a dissolution. Holders of common stock also are entitled to one vote per share in the election of directors to our board of directors. The holders of our common stock do not have cumulative voting rights.

No Right to Call Special Meeting of the Stockholders

The holders of common stock will not have the right to require our company to call a special meeting of the stockholders.

No Conversion, Preemptive or Subscription Rights

The holders of common stock have no conversion, preemptive or subscription rights, other than the automatic conversion of the Series 1, 2 and 3 common stock into unrestricted common stock as described below at “—Transfer Restrictions.”

Liquidation Rights

Subject to any preferential dividend rights of outstanding preferred stock, upon any liquidation, dissolution or winding up of our company, whether voluntary or involuntary, holders of common stock are entitled to receive their pro rata share of such assets as are available for distribution to stockholders. In other words, each share of common stock has equal liquidation rights.

Preferred Stock

Our board of directors is authorized to issue shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the rights, preferences and privileges of the shares of each wholly unissued series and any of its qualifications, limitations or restrictions. Furthermore, the board of directors may increase or decrease the number of shares of any series, but not below the number of shares of that series then outstanding, without any further vote or action by holders of our common stock. At such time, the board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. We currently have no plans to issue any shares of preferred stock.

Transfer Restrictions

Series 1, 2 and 3 common stock is subject to significant transfer restrictions pursuant to our certificate of incorporation. All other shares of common stock, including the common stock being sold in this offering, are not subject to these transfer restrictions. During the applicable transfer restriction period referred to below, shares of Series 1, 2 and 3 common stock are permitted to be transferred only under the following circumstances:

• shares of Series 1, 2 and 3 common stock are transferable to any party approved in advance by the board of directors,

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• shares of Series 1, 2 and 3 common stock issued to any employee stock ownership plan of our company are transferable as provided in such plan,

• shares of Series 1, 2 and 3 common stock are transferable by operation of law, and

• shares of Series 1, 2 and 3 common stock are transferable in a “permitted transfer”.

“Permitted transfers” of Series 1, 2 and 3 common stock include:

• “conversion transfers,” in which Series 1, 2 and 3 common stock of our company is converted into unrestricted common stock in connection with transfers to our company, transfers made in this offering and other conversion transfers approved by our board of directors, and

• “non-conversion transfers,” in which Series 1, 2 and 3 common stock of our company is not converted into unrestricted common stock and remains subject to transfer restrictions in connection with transfers to parties who are then stockholders of our company, transfers to certain family members for estate planning or education purposes, bona fide pledges to lending or financial institutions and other non-conversion transfers approved by our board of directors.

The transfer restriction periods for the Series 1, 2 and 3 common stock will expire:

• 180 days after the close of this offering in the case of Series 1 common stock, and

• 360 days after the close of this offering in the case of Series 2 common stock, and

• 540 days after the close of this offering in the case of Series 3 common stock.

When the transfer restriction period for the applicable series of common stock expires, all shares of such series no longer will be subject to the transfer restrictions and automatically will convert into the same number of shares of common stock. See “Shares Eligible for Future Sale” for limitations on sales by affiliates under the securities laws.

Our board of directors has the ability to reduce the duration of, or to eliminate, in whole or in part, the transfer restrictions applicable to the Series 1, 2 and 3 common stock of our company. In connection with this offering, we have agreed with the underwriters that, except as required to permit the selling stockholders to participate in this offering, we will not waive any of the transfer restrictions applicable to the Series 1, 2 and 3 common stock of our company for a period of 180 days after the date of this prospectus. See “Underwriting.”

Other Certificate of Incorporation and Bylaw Provisions

Board of Directors

Our certificate of incorporation provides that the number of directors constituting our board of directors shall be fixed in the manner provided in our bylaws. Our bylaws provide that the number of directors shall be the same as the number of our initial board of directors. However, this number may be increased or decreased by our board of directors. There currently are ten directors serving on our board, but prior to the time of the offering the number of directors will be increased to eleven. Our certificate of incorporation provides that our board of directors shall be divided into three classes, as nearly equal in number as the then total number of directors constituting the whole board of directors permits, with the term of office of one class expiring each year.

Under Delaware law, the directors of a corporation that has a classified board within the meaning of Delaware law may be removed by the corporation’s stockholders only for cause unless the corporation’s certificate of incorporation provides otherwise. Additionally, as a result of the classification of our board, two annual meetings of stockholders may be required for the stockholders to change a majority of the directors on our

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board. Our certificate of incorporation provides for the removal of any director or the entire board of directors at any time, but only for cause and only by the affirmative vote of the holders of two thirds (2/3) or more of the outstanding shares of our common stock. For these purposes, the term “for cause” means the commission of a felony, or a finding by a court of competent jurisdiction of liability for negligence, or misconduct, in the performance of the director’s duty to our company in a matter of substantial importance to our company, where such adjudication is no longer subject to direct appeal. If the holders of any series of preferred stock have the right to elect one or more directors, the provisions relating to the removal of any director or the entire board of directors would not apply to any director so elected.

Our bylaws provide that vacancies on the board resulting from removal or for any other reason will, unless otherwise required by law, be filled only by a majority vote of the directors then in office, and not by our stockholders. The classification of directors into three classes with staggered terms, the inability of stockholders to remove directors without cause and the inability of stockholders to fill vacancies on the board will make it more difficult to change the composition of our board and in turn may have the effect of delaying, deferring or preventing a change in control of our company.

Nomination Procedures for Directors

The nominating committee of our board of directors is composed entirely of at least three independent members of the board of directors who have been appointed by the board of directors. However, the holders of common stock are entitled to directly nominate persons to stand for election as directors of our company if the nominee is qualified and such stockholder satisfies certain advance notice requirements described below.

Advance Notice Procedures

Advance notice must be delivered to us of any business to be brought by holders of common stock before an annual meeting of the stockholders and of any nominations by stockholders of persons for election to our board of directors at our annual meeting.

Generally, for business to be brought before an annual meeting of our stockholders, holders of common stock must give written notice to the secretary of the company not less than 120 days prior to the anniversary of the date on which we first mailed our proxy materials for the preceding year’s annual meeting of our stockholders. In each case, the notice must set forth specific information regarding such stockholder and each director nominee or other business proposed by holders of common stock, as applicable, as provided in the bylaws.

In the proxy statement and form of proxy prepared and delivered in connection with an annual meeting of stockholders, we will, at our own expense, include the name of any nominee submitted by a stockholder and all other information related to such nominee that is provided with respect to the board of directors’ nominees in such proxy statement and form of proxy in the event that:

• a holder of common stock proposes to nominate an individual for election or reelection as a director of our company, and

• such stockholder has satisfied each of the terms and conditions described above for the nomination of such nominee.

Except as described below with respect to nominations by holders of common stock for persons to be elected to the board of directors of our company at a special meeting of our stockholders at which directors are to be elected, stockholders are not permitted to make proposals, or bring other business, at a special meeting of the stockholders of our company. If we call a special meeting of the stockholders for the purpose of electing one or more directors to our board, stockholders may nominate persons for election to the board by giving written notice to the secretary of our company not later than ten days following the date a public announcement of the special meeting date is made.

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Special Meetings of Stockholders

The chairman of the board, the president or the board of directors of our company may call special meetings of our stockholders. The holders of common stock have no right to require us to call a special meeting of the stockholders.

No Action by Non-Unanimous Written Consent of Stockholders

All actions of the holders of common stock must be taken by a vote of such holders at an annual or special meeting, and such stockholders are not permitted to take action by written consent without a meeting.

Amendment of Certificate of Incorporation

The approval of our board of directors and of the holders of outstanding shares of common stock are required in order to amend the our certificate of incorporation. In the case of the approval of stockholders, the following votes will be required:

• the approval of the holders of at least two thirds (2/3) of the outstanding shares of all classes of capital stock of our company entitled to vote will be required to adopt any amendment to the provisions of the certificate of incorporation relating to (1) the transfer restrictions applicable to the Series 1, 2 and 3 common stock, (2) the size and structure of our board of directors, (3) the qualifications and means of removing our directors, (4) the amendment of our bylaws, or (5) the amendment of the certificate of incorporation,

• the approval of the holders of at least three-fourths (3/4) of the outstanding shares of common stock will be required to adopt any amendment to the provisions of the certificate of incorporation relating to the dissolution of our company, and

• the approval of the holders of at least a majority of the outstanding capital stock entitled to vote will be required to adopt any amendment to all other provisions of the certificate of incorporation.

Amendment of Bylaws

The board of directors of our company has the authority to adopt, amend or repeal our bylaws without the approval of the holders of common stock. However, the holders of common stock have the right to initiate, without the approval of our board of directors, proposals to adopt, amend or repeal our company bylaws. The approval of a majority of the votes cast at any annual or special meeting of the holders of common stock is required in order to adopt, repeal or amend the bylaws in response to such stockholder proposals.

Delaware Anti-Takeover Statute

We are subject to the Delaware anti-takeover statute. Subject to certain exceptions, this statute prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:

• prior to such date, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder,

• upon the completion of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding, for purposes of determining the number of shares outstanding, those shares owned by persons who are directors and also officers and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or

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• on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 ²/3% of the outstanding voting stock which is not owned by the interested stockholder.

For purposes of this statute, a “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an “interested stockholder” is a person who, together with affiliates and associates, owns 15% or more of the corporation’s voting stock or a person who is an affiliate of the corporation and who did own, within three years prior to the date of determination whether the person is an “interested stockholder,” 15% or more of the corporation’s voting stock.

Limitation of Liability of Directors

As authorized by Delaware corporation law, a director of our company is not personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability:

• for any breach of the director’s duty of loyalty to us or our stockholders,

• for any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law,

• for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided by Delaware corporation law, or

• for any transaction from which the director derived an improper personal benefit.

The inclusion of this provision in our certificate of incorporation may have the effect of reducing the likelihood of derivative litigation against directors, and may discourage or deter stockholders or management from bringing a lawsuit against directors for breach of their duty of care, even though such an action, if successful, might otherwise have benefited our company and our stockholders.

We are obligated to indemnify our directors and officers to the fullest extent permitted by law. The bylaws also permit us to secure insurance on behalf of any officer or director for any liability arising out of his or her actions in that capacity, regardless of whether the bylaws would permit indemnification.

Transfer Agent

                     is the stock transfer agent and registrar for the common stock.

Listing Agent

We have filed an application to have our common stock approved for quotation on the NASDAQ Stock Market’s Global Market under the symbol “FCSX.”

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SHARES ELIGIBLE FOR FUTURE SALE

Future sales of substantial amounts of our common stock in the public market after this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.

Upon the completion of this offering, we will have outstanding              shares of common stock, including              shares of Series 1 common stock,              shares of Series 2 common stock, and              shares of Series 3 common stock. The number of shares outstanding upon completion of this offering assumes no exercise of the underwriters’ over-allotment option. We may also issue a total of              shares of common stock issuable upon exercise of options that are currently outstanding and options that we expect to grant to our management and directors upon completion of this offering. All of the shares sold in this offering will be freely tradable without restriction under the Securities Act unless purchased by one of our affiliates as that term is defined in Rule 144 under the Securities Act, which generally includes directors, officers or 10% stockholders.

Transfer Restrictions

Although our currently issued and outstanding shares of Series 1, 2 and 3 common stock are registered under the Securities Act, these shares are subject to significant transfer restrictions under our certificate of incorporation. The transfer restrictions are described about under “Description of Capital Stock—Transfer Restrictions.” The transfer restriction periods will expire:

• 180 days after the close of this offering in the case of Series 1 common stock,

• 360 days after the close of this offering in the case of Series 2 common stock, and

• 540 days after the close of this offering in the case of Series 3 common stock.

None of the shares sold in this offering will be subject to the transfer restrictions under our certificate of incorporation.

Rule 144

Shares of common stock held by any of our affiliates, as that term is defined in Rule 144 of the Securities Act, may be resold only pursuant to further registration under the Securities Act or in transactions that are exempt from registration under the Securities Act. In general, under Rule 144 as currently in effect, any of our affiliates would be entitled to sell, without further registration, within any three-month period a number of shares that does not exceed the greater of:

• 1% of the number of shares of common stock then outstanding, which will equal about [523,000] shares immediately after this offering, or

• the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a Form 144 with respect to the sale.

Sales under Rule 144 also are subject to manner of sale provisions and notice requirements and to the availability of current public information about us.

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS

General

The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of common stock that may be relevant to you if you are a non-U.S. Holder. In general, a “non-U.S. Holder” is any person or entity that is, for U.S. federal income tax purposes, a foreign corporation (or a foreign entity treated as a corporation for U.S. federal income tax purposes), a nonresident alien individual or a foreign estate or trust. This discussion is limited to non-U.S. Holders who hold shares of common stock as capital assets within the meaning of the U.S. Internal Revenue Code of 1986, as amended or the “Code.” Moreover, this discussion is for general information only and does not address all the tax consequences that may be relevant to you in light of your personal circumstances, nor does it discuss special tax provisions, which may apply to you if you relinquished U.S. citizenship or residence.

If you are an individual, you may, in many cases, be deemed to be a resident alien, as opposed to a nonresident alien, by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For these purposes all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year are counted. Resident aliens are subject to U.S. federal income tax as if they were U.S. citizens.

If a partnership, including any entity treated as a partnership for U.S. federal income tax purposes (wherever organized), is a holder of our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A holder that is a partnership, and the partners in such partnership, should consult their own tax advisors regarding the tax consequences of the purchase, ownership and disposition of our common stock.

This discussion does not consider specific facts and circumstances that may be relevant to a particular non-U.S. Holder’s tax position and does not consider U.S. state and local or non-U.S. tax consequences. It also does not consider non-U.S. Holders subject to special tax treatment under the U.S. federal income tax laws (including partnerships or other pass-through entities, banks and insurance companies, dealers in securities, holders of our common stock held as part of a “straddle,” “hedge,” “conversion transaction” or other risk-reduction transaction, controlled foreign corporations, passive foreign investment companies, companies that accumulate earnings to avoid U.S. federal income tax, foreign tax-exempt organizations, former U.S. citizens or residents and persons who hold or receive common stock as compensation). This summary is based on provisions of the Code, applicable Treasury regulations, administrative pronouncements of the U.S. Internal Revenue Service, or the “IRS,” and judicial decisions, all as in effect on the date hereof, and all of which are subject to change, possibly on a retroactive basis, and different interpretations. The authorities on which this summary is based are subject to various interpretations, and any views expressed within this summary are not binding on the IRS or the courts. No assurance can be given that the IRS or other courts will agree with the tax consequences described in this prospectus.

EACH PROSPECTIVE PURCHASER OF COMMON STOCK IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE, MUNICIPALITY OR OTHER TAXING JURISDICTION.

Dividends

Our board of directors has declared in the past, and anticipates declaring in the future, regular annual dividends. See “Dividend Policy.” If distributions are paid on shares of our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated

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earnings or profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, it will constitute a tax-free return of capital that is applied and reduces, but not below zero, a non-U.S. Holder’s adjusted tax basis in our common stock. Any remainder will constitute gain from the sale or exchange of the common stock.

If distributions that are treated as dividends are paid, as a non-U.S. Holder, you will be subject to withholding of U.S. federal income tax at a 30% rate or a lower rate as may be specified by an applicable income tax treaty. To claim the benefit of a lower rate under an income tax treaty, you must properly file with the payor an IRS Form W-8BEN, or successor form, claiming an exemption from or reduction in withholding under the applicable tax treaty. In addition, where dividends are paid to a non-U.S. Holder that is a partnership or other pass-through entity, persons holding an interest in the entity may need to provide certification claiming an exemption or reduction in withholding under the applicable treaty. A non-U.S. Holder of our common stock that is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS. A non-U.S. Holder should consult its own tax advisor regarding its possible entitlement to benefits under an income tax treaty.

If dividends are considered effectively connected with the conduct of a trade or business by you within the United States and, where a tax treaty applies, are attributable to a U.S. permanent establishment of yours, those dividends will be subject to U.S. federal income tax on a net basis at applicable graduated individual or corporate rates but will not be subject to withholding tax, provided an IRS Form W-8ECI, or successor form, is filed with the payor. If you are a foreign corporation, any effectively connected dividends may, under certain circumstances, be subject to an additional “branch profits tax” at a rate of 30% or a lower rate as may be specified by an applicable income tax treaty.

You must comply with the certification procedures described above, or, in the case of payments made outside the United States with respect to an offshore account, certain documentary evidence procedures, directly or under certain circumstances through an intermediary, to obtain the benefits of a reduced rate under an income tax treaty with respect to dividends paid with respect to your common stock. In addition, if you are required to provide an IRS Form W-8BEN to claim the benefit of a lower rate of withholding under an income tax treaty, or IRS Form W-8ECI, or any successor form, as discussed above, you must also provide a U.S. tax identification number.

Gain on Disposition of Common Stock

As a non-U.S. Holder, you generally will not be subject to U.S. federal income tax on any gain recognized on a sale or other disposition of common stock unless:

• the gain is considered effectively connected with the conduct of a trade or business by you within the United States and, where a tax treaty applies, is attributable to a U.S. permanent establishment of yours (in which case you will be taxed in the same manner as a U.S. person, and if you are a foreign corporation, you may be subject to an additional branch profits tax equal to 30% or a lower rate as may be specified by an applicable income tax treaty),

• you are an individual who holds the common stock as a capital asset and are present in the United States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions are met (in which case you will be taxed in the same manner as a U.S. person), or

• we are or become a U.S. real property holding corporation (“USRPHC”). If we were to become a USRPHC, then gain on the sale or other disposition of common stock by you generally would not be subject to U.S. federal income tax provided:

• the common stock was “regularly traded on an established securities market,” and

• you do not actually or constructively own more than 5% of the common stock during the shorter of (i) the five-year period ending on the date of such disposition or (ii) the period of time during which you held such shares.

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In general, a corporation is a USRPHC if the fair market value of its “U.S. real property interests” equals or exceeds 50% of the sum of the fair market value of its worldwide (domestic and foreign) real property interests and its other assets used or held for use in a trade or business. For this purpose, real property interests include land, improvements and associated personal property. We believe that we currently are not a USRPHC. In addition, based on our financial statements and current expectations regarding the value and nature of our assets and other relevant data, we do not anticipate becoming a USRPHC.

Federal Estate Tax

If you are an individual who is a non-U.S. holder at the time of your death, common stock held at that time will be included in your gross estate for U.S. federal estate tax purposes, and may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.

Information Reporting and Backup Withholding Tax

We must report annually to the IRS and to each of you the amount of dividends paid to you and the U.S. federal tax withheld with respect to those dividends, regardless of whether withholding was required. Copies of the information returns reporting those dividends and withholding may also be made available to the tax authorities in the country in which you reside under the provisions of an applicable income tax treaty or other applicable agreements.

Backup withholding is generally imposed (currently at a 28% rate) on certain payments to persons that fail to furnish the necessary identifying information to the payor. You generally will be subject to backup withholding tax with respect to dividends paid on your common stock unless you certify your non-U.S. status on a properly executed Internal Revenue Service Form W-8BEN (or appropriate substitute or successor form) or otherwise establish an exemption. Dividends subject to withholding of U.S. federal income tax as described above in “Dividends” would not be subject to backup withholding.

The payment of proceeds of a sale of common stock effected by or through a U.S. office of a broker is subject to both possible backup withholding and information reporting unless you provide the payor with your name and address and you certify your non-U.S. status under penalties of perjury or you otherwise establish an exemption. In general, backup withholding and information reporting will not apply to the payment of the proceeds of a sale of common stock by or through a foreign office of a broker. If, however, such broker is, for U.S. federal income tax purposes, a U.S. person, a controlled foreign corporation, a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States or a foreign partnership that at any time during its tax year either is engaged in the conduct of a trade or business in the United States or has as partners one or more U.S. persons that, in the aggregate, hold more than 50% of the income or capital interest in the partnership, backup withholding will not apply but such payments will be subject to information reporting, unless such broker has documentary evidence in its records that you are a non-U.S. Holder and certain other conditions are met or you otherwise establish an exemption. Non-U.S. Holders should consult their own tax advisors on the application of information reporting and backup withholding to them in their particular circumstances (including upon their disposition of our common stock).

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against your U.S. federal income tax liability provided the required information is furnished in a timely manner to the IRS.

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UNDERWRITING

BMO Capital Markets Corp. is acting as the representative of the underwriters. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus, each underwriter named below has agreed to purchase from us, and we have agreed to sell to such underwriter, the respective number of shares of common stock shown opposite its name below.

Underwriter	Number of Shares
BMO Capital Markets Corp.
Total

The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all of the shares (other than those covered by the over-allotment option described below) if they purchase any of the shares.

The representatives have advised us that the underwriters propose to offer the shares directly to the public at the public offering price presented on the cover page of this prospectus and to selected dealers, who may include the underwriters, at the public offering price less a selling concession not in excess of $                      per share. The underwriters may allow, and the selected dealers may reallow, a concession not in excess of $                      per share to brokers and dealers. If all of the ordinary shares are not sold at the initial offering price, the underwriter may change the public offering price and the other selling terms. The representatives have advised us that the underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority.

We have granted to the underwriters an option to purchase up to an aggregate of              shares of common stock, exercisable solely to cover over-allotments, if any, at the public offering price less the underwriting discounts and commissions shown on the cover page of this prospectus. The underwriters may exercise this option in whole or in part at any time until 30 days after the date of the underwriting agreement. To the extent the underwriters exercise this option, each underwriter will be committed, so long as the conditions of the underwriting agreement are satisfied, to purchase a number of additional shares proportionate to that underwriter’s initial commitment as indicated in the preceding table. If this option is not exercised in full, the number of shares as to which it is exercised will be apportioned among certain selling stockholders on a pro rata basis.

We, our directors and executive officers and the participants in our directed share program have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any shares of common stock or securities convertible into or exchangeable for shares of common stock, subject to specified exceptions, during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of BMO Capital Markets. See “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions on existing holders of shares of our common stock. BMO Capital Markets in its sole discretion may release any of the securities subject to these lock-up agreements at any time without notice

The 180-day restricted period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the 180-day restricted period we issue an earnings release or announces material news or a material event; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 15-day period following the last day of the 180-day period, in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release of the announcement of the material news or material event.

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The following table summarizes the underwriting discounts and commissions that we will pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares of common stock.

	Per Share		Total
	Without Over- Allotment	With Over- Allotment	Without Over- Allotment	With Over- Allotment
Underwriting Discounts and Commissions paid by us	$	$	$	$
Expenses payable by us	$	$	$	$

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated among the representatives and us. In determining the initial public offering price of our common stock, the representatives will consider:

• prevailing market conditions;

• our historical performance and capital structure;

• estimates of our business potential and earnings prospects;

• an overall assessment of our management; and

• the consideration of these factors in relation to market valuation of companies in related businesses.

We intend to apply to have our common stock approved for quotation on the NASDAQ Global Market under the symbol “FCSX”

The representative may engage in over-allotment transactions, stabilizing transactions, syndicate covering transactions, penalty bids or purchases and passive market making for the purposes of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Securities Exchange Act of 1934.

Over-allotment transactions involve sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by either exercising their over-allotment option and/or purchasing shares in the open market.

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specific maximum.

Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, thus creating a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

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In passive market making, market makers in the common stock who are underwriters or prospective underwriters may, subject to limitations, make bids for or purchase shares of our common stock until the time, if any, at which a stabilizing bid is made.

These stabilizing transactions, syndicate covering transactions, penalty bids and passive market making may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NASDAQ Global Market or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

At our request, the underwriters have reserved up to              shares, or              % of our common stock offered by this prospectus, for sale under a directed share program to our officers, directors, employees, business associates and other individuals who have family or personal relationships with our employees. If any of our current directors or executive officers subject to lock-up agreements purchase these reserved shares, the shares will be restricted from sale under the lock-up agreements. We will determine the specific allocation of the shares to be offered under the directed share program in our sole discretion. All of the persons purchasing the reserved shares must commit to purchase no later than the close of business on the day following the date of this prospectus. The number of shares available for sale to the general public will be reduced to the extent these persons purchase the reserved shares. Shares committed to be purchased by directed share participants that are not so purchased will be reallocated for sale to the general public in the offering. All sales of shares under the directed share program will be made at the initial public offering price set forth on the cover page of this prospectus.

The underwriters expect to facilitate Internet distribution for this offering to certain of their Internet subscription customers through affiliated broker-dealers and other intermediaries. Certain underwriters intend to allocate a limited number of shares for sale to their online brokerage customers. An electronic prospectus is available on Internet websites maintained by BMO Capital Markets. Any allocation for Internet distributions will be made by the underwriters on the same basis as other allocations. In addition, shares of common stock may be sold by the underwriters to securities dealers who resell shares to online brokerage account holders.

Certain of the underwriters have performed investment and commercial banking and advisory services for us from time to time for which they have received customary fees and expenses. Harris N.A., an affiliate of BMO Capital Markets, is a lender to us under a $30 million unsecured credit agreement to meet margin calls, a $5.0 million facility used to secure grain deliveries, a $2.5 million letter of credit facility and a $375,000 letter of credit facility. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” The underwriters may, from time to time, engage in transactions with and perform services for us in the ordinary course of its business.

We have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act of 1933, or to contribute to payments the underwriter may be required to make because of any of those liabilities.

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LEGAL MATTERS

The validity of the common stock offered in this prospectus will be passed upon for us by Stinson Morrison Hecker LLP, Kansas City, Missouri. Certain legal matters in connection with this offering will be passed upon for the underwriters by Mayer, Brown, Rowe & Maw, LLP, Chicago, Illinois.

EXPERTS

The consolidated financial statements and schedules of FCStone Group, Inc. and subsidiaries as of August 31, 2005 and 2004 and for each of the years in the three-year period ended August 31, 2005, have been included in this prospectus in reliance on the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein and upon the authority of said firm as experts in accounting and auditing. The audit report covering the August 31, 2005 consolidated financial statements contains an explanatory paragraph that states that those consolidated financial statements and the related financial statement schedules have been restated as described in Note 2 to the consolidated financial statements.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 (including exhibits, schedules and amendments) under the Securities Act with respect to the shares of common stock to be sold in this offering. This prospectus does not contain all the information set forth in the registration statement. For further information about us and the shares of common stock to be sold in this offering, you should refer to the registration statement. Statements contained in this prospectus relating to the contents of any contract, agreement, or other document are not necessarily complete. Whenever this prospectus refers to any contract, agreement, or other document, you should refer to the exhibits that are a part of the registration statement for a copy of the contract, agreement, or document.

We file annual and quarterly reports and other information with the SEC. You may read and copy all or any portion of the registration statement or any other information we file at the SEC’s Public Reference Room at 450 Fifth Street, NW., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information about the operation of the public reference rooms. Our SEC filings, including the registration statement, are also available to the public from commercial document retrieval services and at the SEC’s web site (http://www.sec.gov).

Annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K are available free of charge on our internet website (www.fcstone.com) as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC.

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INDEX TO COMPANY FINANCIAL STATEMENTS

	Page
FCStone Group, Inc. and Subsidiaries
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Financial Condition as of August 31, 2004 and 2005	F-3
Consolidated Statements of Operations for the Years Ended August 31, 2003, 2004 and 2005	F-4
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the Years Ended August 31, 2003, 2004 and 2005	F-5
Consolidated Statements of Cash Flows for the Years Ended August 31, 2003, 2004 and 2005	F-6
Notes to Consolidated Financial Statements	F-7
Consolidated Statements of Financial Condition as of August 31, 2005 and May 31, 2006 (unaudited)	F-29
Consolidated Statements of Operations for the Three Months and Nine Months Ended May 31, 2005 and 2006 (unaudited)	F-30
Consolidated Statements of Cash Flows for the Nine Months Ended May 31, 2005 and 2006 (unaudited)	F-31
Notes to Consolidated Financial Statements (unaudited)	F-32
Financial Statement Schedules
Condensed Statements of Financial Condition as of August 31, 2004 and 2005	S-1
Condensed Statements of Operations for the Years Ended August 31, 2003, 2004 and 2005	S-2
Condensed Statements of Cash Flows for the Years Ended August 31, 2003, 2004 and 2005	S-3
Valuation and Qualifying Accounts	S-4

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors

FCStone Group, Inc.:

We have audited the accompanying consolidated statements of financial condition of FCStone Group, Inc. and subsidiaries (the Company) as of August 31, 2004 and 2005 and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended August 31, 2005. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedules I and II for each of the years in the three-year period ended August 31, 2005. These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FCStone Group, Inc. and subsidiaries as of August 31, 2004 and 2005 and the results of their operations and their cash flows for each of the years in the three-year period ended August 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As described in Note 2 to the consolidated financial statements, the consolidated financial statements and the related financial statement schedules as of and for the year ended August 31, 2005, have been restated.

/s/ KPMG LLP

Des Moines, Iowa

November 18, 2005, except for Note 2 as to which the date is May 25, 2006

F-2

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except share and per share amounts)

	August 31,
	2004			2005
				(Restated)
ASSETS
Cash and cash equivalents:
Unrestricted	$	7,943		$	25,145
Restricted		1,403			1,410
Segregated		42,786			10,509
Commodity deposits and accounts receivable:
Commodity exchanges and clearing organizations—customer segregated, including United States Treasury bills and notes of $364,040 in 2004 and $338,837 in 2005		292,597			396,446
Proprietary commodity accounts		20,879			18,028
Customer regulated accounts in deficit secured by U.S. Treasury bills and notes of $38,108 in 2004 and $2,786 in 2005 included above		38,964			6,351
Total commodity deposits and accounts receivable		352,440			420,825
Marketable securities at fair value—customer segregated and other (including other of $299 in 2004 and $373 in 2005)		57,799			192,328
Accounts receivable and advances on grain		106,867			110,246
Notes receivable		2,079			9,632
Inventories—grain, fertilizer, and fuel		12,198			14,605
Exchange memberships and stock, at cost (fair value of $2,785 in 2004, $5,803 in 2005) (note 3)		1,222			1,797
Furniture, equipment and improvements, net of accumulated depreciation of $3,734 in 2004 and $4,676 in 2005		8,652			8,206
Deferred income taxes (note 5)		2,710			4,013
Investments in affiliates and others		1,701			1,726
Investments in other organizations		1,452			1,843
Other assets		4,575			3,237
Total assets	$	603,827		$	805,522
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Checks written in excess of bank balance	$	8,022		$	4,880
Commodity and customer regulated accounts payable		411,660			549,200
Trade accounts payable and advances		68,807			129,715
Accrued expenses		16,196			20,764
Notes payable (note 11)		41,531			36,911
Subordinated debt (note 13)		5,750			5,500
Patronage refunds payable in cash		1,869			—
Obligations under capital leases		4,675			4,125
Total liabilities		558,510			751,095
Minority interest (note 1)		5,488			4,755
Redeemable common stock held by Employee Stock Ownership Plan (ESOP) (notes 2 and 10)		—			4,487
Stockholders’ equity (notes 6 and 10)
Preferred stock, nonvoting; $1,000 par value per share, non-dividend bearing, authorized 50,000 shares:
Series I issued 12,972.35 in 2004, -0- shares in 2005		12,972			-0-
Series II issued 897.61 in 2004, -0- shares in 2005		898			-0-
Common stock:
Class A, voting; $5,000 par value per share, nondividend-bearing, authorized 2,000 and -0- shares at August 31, 2004 and 2005, respectively; issued and outstanding 424 and -0- shares at August 31, 2004 and 2005, respectively		2,369			-0-
Class B, voting; $100,00 par value, nondividend-bearing, authorized 100 and -0- shares at August 31, 2004 and 2005, respectively, issued and outstanding 5 and -0- shares at August 31, 2004 and 2005, respectively		500			-0-
Common stock, no par value, authorized -0- and 20,000,000 at August 31, 2004 and 2005, respectively; issued and outstanding -0- and 4,828,279 shares at August 31, 2004 and 2005		-0-			21,524
Accumulated other comprehensive loss		(3,039	)		(4,555	)
Retained earnings		26,129			32,703
		39,829			49,672
Less maximum cash obligation related to ESOP shares (notes 2 and 10)		—			(4,487	)
Total stockholders’ equity		39,829			45,185
Commitments and contingencies (notes 9, 12 and 14)
Total liabilities and stockholders’ equity	$	603,827		$	805,522

See accompanying notes to consolidated financial statements.

F-3

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Year Ended August 31,
	2003		2004		2005
Revenues:
Commissions and clearing fees	$	48,947	$	67,594	$	76,674
Service, consulting and brokerage fees		10,566		12,008		18,913
Interest		4,610		3,982		8,177
Other		4,299		4,521		7,463
Sales of commodities		1,164,334		1,536,209		1,290,620
Total revenues		1,232,756		1,624,314		1,401,847
Costs and expenses:
Cost of commodities sold		1,150,608		1,519,221		1,275,094
Employee compensation and broker commissions		25,955		30,160		32,578
Pit brokerage and clearing fees		16,382		26,713		33,141
Introducing broker commissions		8,551		10,704		14,459
Employee benefits and payroll taxes (note 7)		5,971		7,136		8,044
Interest		3,040		4,418		3,946
Depreciation and amortization		837		861		1,551
Bad debt expense		76		716		4,077
Other expenses (note 9)		15,270		15,365		18,926
Total costs and expenses		1,226,690		1,615,294		1,391,816
Income before income tax expense and minority interest		6,066		9,020		10,031
Minority interest (note 1)		561		576		(499	)
Income after minority interest and before income tax expense		5,505		8,444		10,530
Income tax expense (note 5)		1,200		2,030		3,950
Net income	$	4,305	$	6,414	$	6,580
Basic and diluted shares outstanding (note 6)						4,357
Basic and diluted earnings per share (note 6)					$	1.51

See accompanying notes to consolidated financial statements.

F-4

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND

COMPREHENSIVE INCOME

(in thousands)

	Common Stock			Preferred Stock			Common Stock						Accumulated Other Comprehensive Loss			Retained Earnings			Maximum Cash Obligation Related to ESOP Shares			Total Stock- holders’ Equity
							Class A			Class B
Balance at August 31, 2002	$	—		$	13,620		$	2,782		$	500		$	(1,927	)	$	20,197		$	—		$	35,172
Net income		—			—			—			—			—			4,305			—			4,305
Pension adjustment		—			—			—			—			(2,005	)		—			—			(2,005	)
Total comprehensive income																							2,300
Transfer of Class A to preferred stock due to member reorganizations		—			67			(67	)		—			—			—			—			—
Patronage refunds:
Payable in cash:
Class A		—			—			—			—			—			(948	)		—			(948	)
Class B		—			—			—			—			—			(482	)		—			(482	)
Application of current year patronage to common and preferred stock		—			525			47			—			—			(572	)		—			—
Cash received on shares issued and subscribed		—			—			2			—			—			—			—			2
Cash disbursed on shares retired		—			(206	)		(11	)		—			—			—			—			(217	)
Balance at August 31, 2003		—			14,006			2,753			500			(3,932	)		22,500			—			35,827
Net earnings		—			—			—			—			—			6,414			—			6,414
Pension Adjustment		—			—			—			—			893			—			—			893
Total comprehensive income		—			—			—			—			—									7,307
Transfer of Class A to preferred stock due to member reorganizations		—			49			(49	)		—			—			—			—			—
Patronage refunds:
Payable in cash:
Class A		—			—			—			—			—			(1,420	)		—			(1,420	)
Class B		—			—			—			—			—			(449	)		—			(449	)
Application of current year patronage to common and preferred stock		—			851			65			—			—			(916	)		—			—
Cash received on shares issued and subscribed		—			—			1			—			—			—			—			1
Cash disbursed on shares retired		—			(1,036	)		(401	)		—			—			—			—			(1,437	)
Balance at August 31, 2004		—			13,870			2,369			500			(3,039	)		26,129			—			39,829
Net income		—			—			—			—			—			6,580			—			6,580
Pension adjustment		—			—			—			—			(1,516	)		—			—			(1,516	)
Total comprehensive income		—			—			—			—			—			—			—			5,064
Application of prior year’s patronage		—			6			—			—			—			(6	)		—			—
Conversion, as a result of restructuring		16,737			(13,872	)		(2,365	)		(500	)		—			—			—			—
Repurchase of stock		(605	)		—			—			—			—			—			—			(605	)
Cash received on shares issued, as restated		6,231			—			—			—			—			—			(4,487	)		1,744
Cash disbursed on shares retired		—			(4	)		(4	)		—			—			—			—			(8	)
Registration costs		(839	)		—			—			—			—			—			—			(839	)
Balance at August 31, 2005, as restated	$	21,524		$	—		$	—		$	—		$	(4,555	)	$	32,703		$	(4,487	)	$	45,185

See accompanying notes to consolidated financial statements.

F-5

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended August 31,
	2003			2004			2005
Cash flows from operating activities:
Net income	$	4,305		$	6,414		$	6,580
Depreciation and amortization		837			861			1,551
Gain on sale of Chicago Board of Trade seat		—			—			(1,750	)
Gain on disposal of Chicago Board of Trade Clearing Corporation stock		(263	)		(833	)		—
Equity in earnings of affiliates		(175	)		(66	)		(25	)
Minority interest, net of distributions		351			1,380			(733	)
Change in commodity accounts receivable/payable, marketable securities and customer segregated funds, net		(576	)		(12,535	)		(33,097	)
Increase in accounts receivable and advances on grain		(25,845	)		(19,622	)		(3,379	)
(Increase) decrease in inventory—grain and fuel		(7,197	)		10,831			(2,407	)
Increase in other assets		(1,202	)		(1,627	)		(356	)
Increase in accounts payable		20,389			30,152			60,908
Increase in accrued expenses		1,609			2,147			3,052
Net cash provided by (used in) operating activities		(7,767	)		17,102			30,344
Cash flows from investing activities:
Purchase of furniture, equipment, and improvements		(767	)		(918	)		(1,105	)
Net change in investment in marketable securities		1			—			—
(Issuance) collections of notes receivable		2,503			9,732			(7,553	)
Purchase of exchange seat		—			—			(925	)
Purchase of CME clearing firm stock		—			(68	)		—
Proceeds from sale of Chicago Board of Trade Clearing Corporation stock		648			1,912			—
Proceeds from sale of Chicago Board of Trade exchange seat		—			—			2,100
Net cash (used in) provided by investing activities		2,385			10,658			(7,483	)
Cash flows from financing activities:
(Decrease) increase in checks written in excess of bank balance		—			8,022			(3,142	)
(Payments on) proceeds from note payable, net		11,035			(34,517	)		(4,620	)
Proceeds from issuance of common stock		2			1			1,744
Proceeds from issuance of redeemable common stock held by ESOP		—			—			4,487
Payment of redemption of stock		(217	)		(1,437	)		(613	)
Payment of prior year patronage		(937	)		(1,429	)		(1,869	)
Payments under capital lease		(138	)		(688	)		(550	)
Proceeds from subordinated debt		—			5,750			9,000
Payment of subordinated debt		(500	)		(500	)		(9,250	)
Monies deposited in escrow		(1,400	)		—			(7	)
Debt issuance costs		—			(125	)		—
Registration costs		—			—			(839	)
Net cash (used in) provided by financing activities		7,845			(24,923	)		(5,659	)
Net increase in cash and cash equivalents—unrestricted		2,463			2,837			17,202
Cash and cash equivalents—unrestricted—at beginning of year		2,643			5,106			7,943
Cash and cash equivalents—unrestricted—at end of year	$	5,106		$	7,943		$	25,145
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	3,154		$	4,785		$	3,821
Income taxes		1,187			2,057			4,215
Supplemental disclosure of noncash investing and financing activities:
Application of current year patronage to common and preferred stock	$	572		$	916		$	—
Transfer of Class A common stock to preferred stock, due to member reorganizations		67			49			—
Transfer of retained earnings to patronage payable, due to patronage refunds		1,430			1,869			—

See accompanying notes to consolidated financial statements.

F-6

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS

ORGANIZATION

The accompanying consolidated financial statements include the financial statements of FCStone Group, Inc. and its wholly-owned subsidiaries, FCStone, L.L.C. (FCStone); FCC Investments, Inc. (FCC Investments); FCStone Trading L.L.C. (FCStone Trading); FCC Futures, Inc.; FCStone Financial, Inc. (FCStone Financial); FCStone Forex LLC; FCStone International, LLC; and 70% owned FGDI, L.L.C. (FGDI); and 70% owned FCStone Merchant Services, LLC (FCStone Merchant Services) (collectively, the Company). All significant intercompany balances and transactions have been eliminated in consolidation.

FCStone is a commodity futures commission merchant servicing customers primarily in grain and energy related businesses. FCC Investments is registered as a securities broker-dealer. FCStone Trading provides risk management consulting services, acts as a dealer in over-the-counter (OTC) derivative contracts on physical commodities. FCC Futures, Inc. acts as a guaranteed introducing broker of FCStone and is registered with the National Futures Association. FCStone Financial provides railcar services to grain companies through leasing and subleasing of railcars and also enters into sale/repurchase agreements with grain companies for the purchase and sale of certain commodities. FCStone Forex LLC provides OTC interbank currency dealing services to self-directed and professionally managed client accounts. FGDI’s primary operations relate to grain merchandising. FCStone Merchant Services provides specialized financing through inventory repurchase arrangements, transactional commodity finance arrangements, and processing and tolling arrangements. FCStone International, LLC owns subsidiaries formed in Canada and Brazil.

The Company’s investment in Farmers Commodities Transportation Company, LLC (FCTC) represents 10% of the outstanding member units and is reported under the equity method at August 31, 2004 and 2005. FCTC provides railcar service through the leasing and subleasing of railcars and brokering the usage of these cars. FCStone provides management services, including accounting, administrative, personnel, and office space, to FCTC and has two members on FCTC’s board of directors. The Company also has minority holdings in two other entities, Lehi Mills L.L.C. and Hurley & Associates, both of which are carried under the equity method.

On March 1, 2005, the voting members of the Company approved the restructuring of the Company by terminating the Company’s cooperative status and ending the patronage-based rights accruing to the Company’s members (see note 9).

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

COMMODITY DEPOSITS AND ACCOUNTS RECEIVABLE/PAYABLE

Commodity accounts include equities and deficits in open futures and option contracts and funds received to margin or guarantee commodity transactions. The Company is obligated to fund margin calls on open contracts and, in turn, receives reimbursement from customers for maintenance of their respective margins. In accordance with the Commodity Futures Trading Commission’s regulations, customer funds received to margin, guarantee, and/or secure commodity futures transactions are segregated and accounted for separately. Commodity deposits and receivables with clearing organizations and commodity customer payables are reported gross except where a right of offset exists.

F-7

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

MARKETABLE SECURITIES

Marketable securities consist of short-term overnight investments in U.S. Treasury and U.S. Government Agency repurchase agreements and money market funds allowed by the Commodities Futures Trading Commission’s regulations for segregated customer funds. These securities are reported at market value, which approximates cost given their short-term nature. Unrealized gains and losses are recognized in other comprehensive income.

TRADE ACCOUNTS RECEIVABLE

The Company records trade receivables due from its customers at the time sales are recorded in accordance with its revenue recognition policy. The future collectibility of these amounts can be impacted by the Company’s collection efforts, the financial stability of its customers, and the general economic climate in which it operates. The Company applies a consistent practice of establishing an allowance for accounts that it believes may become uncollectible through reviewing the historical aging of its receivables and by monitoring the financial strength of its customers. If the Company becomes aware of a customer’s inability to meet its financial obligations (e.g., where it has filed for bankruptcy), the Company establishes a specific allowance for the potential bad debt to reduce the net recognized receivable to the amount it reasonably believes it is probable will be collected.

INVENTORIES

Grain inventories are carried at market value, which is net realizable value (NRV). NRV is determined by estimating selling prices in the applicable market location and related costs of disposal in the ordinary course of business. Realized and unrealized gains and losses on futures contracts are credited or charged to current cost of sales.

Fertilizer inventory is recorded at the lower of cost or market using the first-in, first-out method.

Fuel inventory is recorded at the lower of cost or market using the weighted average method. Additionally, FCStone Trading has minimum line fill requirements at two pipeline companies totaling 588,000 gallons of liquid fuels. If such line fill requirements are not met, the Company cannot deliver product again until they are met. FCStone Trading is required by certain fuel suppliers to make payment for fuel prior to line fills. Such payments have been reported as inventory and amounted to $1,327,000 and $0 at August 31, 2004 and 2005, respectively.

A summary of inventories as of August 31, 2004 and 2005 are as follows:

	August 31,
	2004		2005
Grain	$	8,748,984	$	13,507,493
Fertilizer		415,424		633,293
Fuel		3,034,270		464,315
	$	12,198,678	$	14,605,101

DERIVATIVE FINANCIAL INSTRUMENTS—GRAIN

FGDI’s use of derivative instruments includes commodity futures and option contracts offered through regulated commodity exchange to reduce price risk. FGDI does not use derivative instruments for trading purposes and have procedures in place to monitor and control their use.

F-8

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounting for these derivative instruments is done in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” as amended by SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” Derivative instruments are required to be reported on the consolidated statements of financial condition at fair values. Fair values are determined based on published prices from regulated commodity exchanges.

COMMODITY PRICE RISK

FGDI has open cash contracts for the purchase and sale of grain, which are reported at market value and the resulting gains or losses are recognized currently in cost of products sold. FGDI is exposed to risks that it may not have sufficient grain quantity to deliver against its contacts and thus would be obligated to purchase grain at prevailing market prices in order to meet such commitments. FGDI is exposed to risk of loss in the market value of net open commodity positions, which are calculated by aggregating grain inventories and cash grain purchases and sales contracts. In order to reduce these risks, FGDI generally takes opposite and offsetting positions using futures contracts or options.

Realized and unrealized gains and losses on futures contracts and option contracts used as economic hedges of grain inventories and purchase and sale contracts are recognized in cost of products sold for financial reporting, using market prices. Inventories and cash purchase and sale contracts are marked to fair value using market-based prices so that gains and losses on the derivative contracts are offset by gains or losses on inventories and purchase and sale contracts.

HEDGE POLICY—FUEL

The Company follows the policy of hedging its fuel purchases made on behalf of its customers to minimize the risk due to market fluctuations. The gains and losses relating to closed hedge positions are either billed to or returned to the participant members and are allocated based upon their respective volume of business. The Company is exposed to credit risk of participating members, to the extent they fail to settle their obligations.

Balances receivable from or due to Fuel Alliance members under these hedging contracts are reported at market value based on publicly available third-party pricing services and reflected as other receivables or accounts payable—customers in the financial statements and the related unrealized gain or loss is recorded in cost of fuel sold.

FURNITURE, EQUIPMENT, SOFTWARE, AND IMPROVEMENTS

Furniture, equipment, software, and improvements are recorded at cost. Expenditures for maintenance, repairs, and minor replacements are charged to operations, while expenditures for major replacements and betterments are capitalized.

FGDI had leased property, primarily comprised of grain bins, under net carrying value of $5,568,750 and $4,950,000 at August 31, 2004 and 2005, respectively (see note 8).

Depreciation expense is provided using the straight-line method over the estimated useful lives of the assets. Furniture, equipment, and leasehold improvements are depreciated over five to forty years. Software is depreciated over a useful life of three years. Capital leases for grain bins are depreciated over the remaining life of the lease from the date placed in service.

CASH AND CASH EQUIVALENTS—UNRESTRICTED

Cash equivalents consist of investments with original maturities of three months or less and include money market funds totaling $3,261,900 and $14,725,850 at August 31, 2004 and 2005, respectively.

F-9

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CASH AND CASH EQUIVALENTS—RESTRICTED

FCStone and FGDI have deposited monies into an escrow account held at a financial institution, in connection with FGDI’s capital lease obligation (see note 8). The deposited funds, and all earnings, are required to be held in escrow until repayment of the bond sinking fund.

CASH AND CASH EQUIVALENTS—SEGREGATED

Pursuant to requirements of the Commodity Exchange Act, funds deposited by customers relating to futures contracts in regulated commodities must be carried in separate accounts which are designated as segregated customers’ accounts. At August 31, 2004 and 2005, cash and cash equivalents—segregated included an interest bearing cash account of $35,118,576 and $5,043,322, respectively, for deposit of customer funds.

MINORITY INTERESTS

Minority interest in net assets and income reflected in the accompanying consolidated financial statements consists of:

a) A 30% minority interest held by an unaffiliated third party in FGDI, a domestic limited liability company, for 2003, 2004 and 2005.

b) A 30% minority interest held by an unaffiliated third party in FCStone Merchant Services, a domestic limited liability company for 2004 and 2005.

The following tables set forth the components of minority interest in the consolidated statements of financial condition:

	August 31,
	2004		2005
FGDI, LLC	$	4,581,418	$	3,736,249
FCStone Merchant Services, LLC		906,921		1,018,776
Total	$	5,488,339	$	4,755,025

COMMON STOCK HELD BY ESOP

In 2005, the Company formed an employee stock ownership plan (ESOP) and the ESOP purchased shares of the Company’s common stock. The Company’s maximum cash obligation related to these shares is classified outside stockholders’ equity because the shares are not readily traded and could be put to the Company for cash.

COMMISSION REVENUE AND EXPENSE AND CLEARING AND TRANSACTION FEES

Commissions on futures contracts are recognized when the related open commodity futures transaction is closed. Commissions on option contracts are recognized upon the purchase or sale of the option. Clearing and transaction fees are charged when each trade is made (opened and closed).

SERVICE AND CONSULTING FEES

Risk management service and consulting fees are billed and recognized as revenue on a monthly basis when such services are provided. Such agreements are generally for one-year periods but are cancelable by either party with a 30-day notice.

F-10

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

REVENUE RECOGNITION ON PURCHASE AND SALE OF COMMODITIES

The Company recognizes revenue on sales when the agricultural products or fuel are shipped and/or the customer takes ownership and assumes risk of loss. In addition, in accordance with accounting principles generally accepted in the United States of America, revenues from certain activities should be reported gross with a separate display of cost of sales. Revenues from our grain merchandising and fuel sales have been presented gross. These grain merchandising and fuel sales include activities in which we are the primary obligor responsible for fulfillment, act as principal, change the product or perform part of the service, take title to the inventory and assume the risk and rewards of ownership, such as the risk of loss for collection and delivery.

REVENUE RECOGNITION ON COMMODITY FINANCING TRANSACTIONS

The Company recognizes revenue on sales in instances where the Company is not the primary obligor in the arrangement, based on the amount retained. These commodity financing transactions include activities in which the Company does not take title to the commodities and does not have the risks and rewards of ownership. The Company’s compensation, a stated percentage of the transaction’s profit, is calculated and recorded upon settlement of the transaction, as funds become available for distribution.

OTHER REVENUES

The Company reports its equity in the earnings of unconsolidated affiliates as other revenue. This amounted to $185,304, $65,569, and $25,263, in 2003, 2004 and 2005, respectively.

The Company recorded a gain on the sale of a Chicago Board of Trade exchange seat in the amount of $1,749,850 in 2005, which is included in other income.

The Company recorded a gain on the sale of its investment in The Clearing Corporation stock of $263,015 in 2003 and $832,880 in 2004, which is included in other income.

PATRONAGE REFUNDS

Prior to September 1, 2004, the Company operated on a cooperative basis; accordingly, substantially all savings arising from business transacted with or for members were allocated to them in the form of cash or stockholders’ equity.

INCOME TAXES

Prior to September 1, 2004, the Company operated as a nonexempt cooperative under Sections 1381 through 1388 of the Internal Revenue Code. Accordingly, federal income taxes were based on nonmember savings and the portion of member savings not allocated as patronage refunds, if any. The companies file a consolidated income tax return, and income taxes are allocated to the companies on the basis of their taxable income.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Valuation allowances will be recorded to reduce deferred tax assets when is more likely than not that a tax benefit will not be realized.

F-11

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

RECLASSIFICATIONS

Certain amounts in the fiscal year 2003, 2004 and 2005 consolidated financial statements have been reclassified. Revenues generated from ocean vessel dockage and related income in our grain merchandising segment have been reclassified to other income from sales of commodities. Expenses related to the dock facility in our grain merchandising segment have been reclassified from cost of commodities sold to the applicable expense. These reclassifications are not significant and are intended to result in revenues and costs associated with grain merchandising that better reflect the purchases and delivery of grain, excluding revenues and expenses that are ancillary to those operations.

2. RESTATEMENT

The Consolidated Statements of Financial Condition, Stockholders’ Equity and Comprehensive Income, and Cash Flows as of August 31, 2005 and for the year then ended have been restated to reclassify 448,692 of shares of common stock, owned by the ESOP separate from permanent stockholders’ equity. Management determined that the redemption features for shares held by the ESOP, with a value of $4,486,920, are not solely within the control of the Company, thus requiring presentation as temporary equity. This restatement has no impact on the Company’s results of operations, net cash flows from operating, investing and financial activities or compliance with covenants related to any credit facilities for the year ended August 31, 2005.

The following table summarizes the impact of the restatements on the financial statements:

	As previously reported			As restated
	August 31, 2005			August 31, 2005
	(In thousands)
Consolidated Statement of Financial Condition:
Redeemable common stock held by ESOP	$	—		$	4,487
Stockholders’ Equity:
Common stock, no par value		21,524			21,524
Accumulated other comprehensive loss		(4,555	)		(4,555	)
Retained earnings		32,703			32,703
		49,672			49,672
Maximum cash obligation related to ESOP shares		—			(4,487	)
Total stockholders’ equity	$	49,672		$	45,185

3. EXCHANGE MEMBERSHIPS

On January 18, 2005, FCStone entered into an agreement to jointly purchase a full membership in the New York Mercantile Exchange. The cost of the membership was $925,000, of which $550,000 was financed through a third-party with an installment note to be paid over 96 installments, carrying an interest rate of 1.75 percent over the current Fed Fund rate per the Wall Street Journal.

At August 31, 2005, the Company’s exchange memberships include seats on the Chicago Board of Trade, the Board of Trade of Kansas City, Missouri, Inc., the Minnesota Grain Exchange, the New York Mercantile Exchange and the Chicago Mercantile Exchange. The cost of these memberships was $641,000, $111,000, $10,500, $925,000 and $42,000, respectively.

4. SEGREGATED REQUIREMENTS

Pursuant to the requirements of the Commodity Exchange Act, funds deposited by customers of the Company relating to futures contracts in regulated commodities must be carried in separate accounts which are designated as

F-12

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

segregated customers’ accounts. Certain amounts in the accompanying table reflect reclassifications and eliminations required for regulatory filing and as a result, may differ from those presented in the accompanying consolidated statements of financial position. Funds deposited by customers and other assets, which have been aggregated as belonging to the commodity customers at August 31, 2004 and 2005, are as follows:

	August 31,
	2004		2005
Cash-segregated	$	42,724,239	$	9,818,297
Marketable securities, at fair value—customer segregated		57,428,535		191,951,270
Marketable securities held at a bank classified in commodity deposits and accounts receivable from commodity exchanges and clearing organizations		19,625,336		27,056,721
Commodity deposits and accounts receivable from commodity exchanges and clearing organizations, including marketable securities, net of omnibus eliminations		270,174,709		365,906,721
		389,952,819		594,733,009
Amount required to be segregated		377,555,966		571,451,661
Excess funds in segregation	$	12,396,853	$	23,281,348

Funds deposited by customers and other assets, which are held in separate accounts for foreign futures, and foreign options customers at August 31, 2004 and 2005 are as follows:

	August 31,
	2004		2005
Cash-segregated	$	100,000	$	100,000
Equities with registered futures commissions merchants		133,635		72,625
Amounts held by members of foreign boards of trade		1,864,302		787,224
		2,097,937		959,849
Amount required to be segregated		684,210		130,584
Excess funds in segregation	$	1,413,727	$	829,265

5. INCOME TAXES

Income tax expense consists of current and deferred taxes as follows:

	2003			2004			2005
Current:
Federal	$	1,164,800		$	2,425,700		$	4,027,000
State and local		75,200			256,300			373,000
Total current		1,240,000			2,682,000			4,400,000
Deferred:
Federal		(37,800	)		(615,700	)		(402,000	)
State and local		(2,200	)		(36,300	)		(48,000	)
Total deferred		(40,000	)		(652,000	)		(450,000	)
Total income tax expense	$	1,200,000		$	2,030,000		$	3,950,000

F-13

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Total income tax expense differs from the “expected” tax expense computed by applying the federal income tax rate of 34% to earnings before income tax expense as follows:

	2003			2004			2005
“Expected” tax expense	$	1,871,799		$	2,870,937		$	3,580,247
Patronage refund deduction		(680,678	)		(1,002,609	)		—
State income tax		48,169			145,300			214,500
Nondeductible expenses and other		(39,290	)		16,372			155,253
Income tax expense	$	1,200,000		$	2,030,000		$	3,950,000

The tax effects of temporary differences that give rise to deferred income tax assets are:

	2004		2005
Pension liability	$	1,295,000	$	2,182,500
Deferred compensation		1,036,700		1,440,100
Bad debt reserve		124,200		243,000
All other assets		254,100		147,100
Net deferred tax assets	$	2,710,000	$	4,012,700

Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences. As such, no valuation allowances have been provided.

6. EARNINGS PER SHARE

Prior to the conversion from a cooperative to a corporation, per share data had been omitted because, under the cooperative structure, earnings of the Company were distributed as patronage dividends to members based on the level of business conducted with the Company as opposed to a common shareholder’s proportionate share of underlying equity in the Company. Under the corporate structure, earnings of the Company may be distributed to shareholders based on their proportionate share of underlying equity. Earnings per share has been presented in the accompanying Consolidated Statement of Operations. The calculation of the basic and diluted shares outstanding for the year ended August 31, 2005, assumes the shares issued as a result of the restructuring had been issued and outstanding for the full year.

7. RETIREMENT PLANS

The Company has a noncontributory retirement plan, which is a defined benefit plan that covers substantially all employees. The Company’s policy is to fund amounts that are intended to provide for benefits attributed to service to date.

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents changes in, and components of, the Company’s net liability for retirement costs:

Changes in Benefit Obligation	2003			2004			2005
Benefit Obligation at beginning of year	$	11,215,691		$	16,604,588		$	18,432,020
Service Cost with interest		1,157,413			1,624,129			1,708,926
Interest Cost		838,582			988,797			1,143,801
Assumption Changes		3,373,469			(769,016	)		3,403,226
Actuarial (gain)/loss		268,711			245,927			(132,427	)
Benefits Paid		(249,278	)		(262,405	)		(289,449	)
Benefit Obligation at end of year		16,604,588			18,432,020			24,266,097
Changes in Plan Assets
Fair Value at beginning of year		6,403,797			7,217,997			10,534,915
Actual Return		83,496			1,391,001			454,266
Employer Contribution		979,982			2,188,322			2,585,940
Benefits Paid		(249,278	)		(262,405	)		(289,449	)
Fair Value at end of year		7,217,997			10,534,915			13,285,672
Funded Status		(9,386,591	)		(7,897,105	)		(10,980,425	)
Unrecognized actuarial (gain)/loss		9,006,087			7,189,412			10,855,102
Contributions from Measurement Date to Fiscal Year End		916,555			867,120			419,784
Minimum Liability		(5,853,525	)		(3,755,667	)		(6,702,314	)
Accrued pension cost	$	(5,317,474	)	$	(3,596,240	)	$	(6,407,853	)

A change in the minimum pension liability resulted in a $893,224 after-tax reduction to other comprehensive loss in 2004 and a $1,515,912 after-tax charge to other comprehensive loss in 2005.

The following table displays FCStone Group, Inc.’s plans that have accumulated benefit obligations and projected benefit obligations in excess of plan assets:

	August 31,
	2004		2005
Accumulated benefit obligations	$	14,131,155	$	19,767,104
Projected benefit obligations	$	18,432,020		24,266,097
Plan assets	$	10,534,915		13,285,672

The retirement benefit obligation was based upon an annual measurement date of June 30 and was determined using the following weighted-average assumptions:

	2003	2004	2005
Weighted-average assumptions
Discount rate—end of year	6.00%	6.25%	5.25%
Expected return on assets	8.50%	8.50%	8.50%
Rate of compensation increase—based on age graded scale	3.50% to 7.20%	3.50% to 7.20%	2.50% to 7.20%

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The components of retirement benefit costs recognized in the consolidated statements of operations were as follows:

	2003			2004		2005
Service cost	$	1,157,413		$	1,624,129	$	1,708,926
Interest cost		838,582			988,797		1,143,801
Less: Actual return on assets		83,496			1,391,001		454,266
Net amortization and deferral		(124,990	)		1,293,586		(79,103	)
	$	1,787,509		$	2,515,511	$	2,319,358

The following table sets forth the actual asset allocation for the years ended August 31, 2004 and 2005, and the target asset allocation for the Company’s plan assets:

	August 31,				Target Asset Allocation(1)
	2004		2005
Equity securities	71	%	73	%	65% to 75%
Debt securities	29	%	27	%	25% to 35%
Total	100	%	100	%

(1) The long-term goal for equity exposure and for fixed income exposure is within the limits presented. The exact allocation at any point in time is at the discretion of the investment manager, but should recognize the need to satisfy both the volatility and the rate of return objectives for equity exposure, and satisfy the objective of preserving capital for the fixed income exposure.

The assets of the qualified pension plan are managed in a way that reflects the uniqueness of the Plan:

• Over the long-term, the risk of owning equities has been, and should continue to be, rewarded with a somewhat greater return than that available from fixed income investments.

• The role of fixed income investments are recognized as vehicles with the potential for dampening the volatility of rates of return, while producing a predictable stream of income.

The following Investment Objectives are believed to be reasonable and achievable within the guidelines of the Investment Philosophy:

• Over the long-term, the Plan should achieve a minimum average total rate of return of four percentage points (4.0%) above the rate of inflation as measured by the Consumer Price Index.

• The real rate of return goal assumes the following: real rate of return for equities of 10.0% and a real rate of return for fixed income of 4.0%.

• The fund variability should be no greater than the average variability of the markets themselves.

• Relative and comparative performance will also be a factor in the evaluation of the quality of investment management services rendered.

The Company expects to contribute approximately $2.5 million to the pension plan during 2006.

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following benefit payments, which reflect expected future service, are expected to be paid:

Fiscal Year	Pension Benefits
2006	$	337,707
2007		388,286
2008		452,825
2009		538,732
2010		655,192
2011 – 2015		5,688,709

The Company participates in a 401(k) plan in the Thrift/Savings Plan for Cooperatives, a defined contribution plan. The Company contributed approximately $710,000, $813,000 and $913,000 to the 401(k) plan during 2003, 2004 and 2005, respectively.

8. ADJUSTED NET CAPITAL REQUIREMENTS

Pursuant to the rules, regulations, and requirements of the Commodity Futures Trading Commission and other regulatory agencies, FC Stone is required to maintain certain minimum net capital as defined in such rules, regulations, and requirements. Net capital and the related net capital requirement may fluctuate on a daily basis. FC Stone’s adjusted net capital and minimum net capital requirement at August 31, 2004 and 2005 were as follows:

	2004		2005
Adjusted net capital	$	23,426,399	$	24,935,736
Minimum net capital requirement	$	11,842,162	$	17,480,009

The rules, regulations, and requirements of the Commodity Futures Trading Commission prohibit the withdrawal of equity if, after giving effect to such withdrawal and capital reductions which are scheduled to occur within six months, adjusted net capital is less than the greater of 120% of the minimum financial requirements of the CFTC or any self-regulatory organization of which FCStone is a member.

FCC Investments, Inc. is required to maintain certain net capital as defined by the Securities and Exchange Commission. At August 31, 2004 and 2005, FCC Investments net capital was $346,898 and $385,603, respectively. The minimum net capital requirement was $250,000 at August 31, 2004 and 2005, respectively.

9. COMMITMENTS

The Company leases office space, equipment, automobiles, and an airplane under noncancelable operating leases which expire on various dates through 2008. Most of the Company’s leases provide that the Company pay taxes, maintenance, insurance, and other expenses. At August 31, 2005, minimum rental payments due under operating leases were as follows: 2006, $1,692,000; 2007, $1,490,000; 2008, $1,303,000; 2009, $645,000; and 2010, $320,000.

The rental expense under the above operating leases was approximately $1,968,000, $1,862,000 and $2,167,000, in 2003, 2004 and 2005, respectively.

FCStone Financial leases covered hopper cars and, in turn, subleases these cars to a railroad company. The original operating lease expired on September 30, 2002, and FCStone Financial continues to lease the cars on a

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

month-to-month basis as allowed under the original lease terms. Rental expense, net of mileage credits and maintenance costs, under this lease totaled approximately $620,000, $642,000, and $656,000, in 2003, 2004 and 2005, respectively. The original sublease also expired on September 30, 2002 and was renewed on a cancelable basis for a three year period beginning October 1, 2002. Annual lease rentals under this agreement are expected to be approximately $757,000 in 2006. Sublease rental income, net of mileage credits and maintenance costs, totaled approximately $795,000, $830,000, and $831,000, in 2003, 2004 and 2005, respectively.

During the year ended August 31, 2003, FGDI entered into a lease agreement for grain bins that were under construction, and recorded a capitalized asset and capital lease obligation of $5.5 million. Construction of the grain bins was completed in August 2004. The capitalized asset was placed into service during September, 2005. FGDI made payments on the lease equal to $137,500, $687,500 and $550,000 during 2003, 2004 and 2005, respectively. The lease expires December 1, 2012 and annual minimum lease payments are equal to $550,000. FGDI also leases grain storage facilities under various operating leases with expiration dates ranging from August 31, 2005 through September 30, 2013.

FGDI has another operating lease for grain facilities in Mobile, Alabama, requiring an annual lease commitment of $800,000, which is included in the future minimum rental payments below. Payment of the annual lease amount, or a portion thereof, must be made in the instances where annual rail service and dockage income collected by the lessor, relating to the facilities’ volume of grain bushels handled, does not cover the annual lease amount, Additionally, the minority owner of FGDI has agreed to load a certain minimum number of bushels through the facility. Cash receipts by the lessor, associated with elevation of the member bushels, have been adequate to fund the minimum lease payment for the years ending August 31 2003, 2004 and 2005.

FGDI leases covered hopper cars for use in its Ohio operations under various operating leases from unrelated parties, with term ranging from twelve to sixty months. Rental expenses under these leases, which are included in cost of sales, totaled approximately $1,600,000, $2,000,000 and $2,800,000, and in 2003, 2004 and 2005, respectively.

FGDI’s approximate future minimum rental payments for the above facilities and railcars for subsequent fiscal years are as follows: 2006, $4,507,000; 2007, $3,480,000; 2008, $2,941,000; 2009, $1,719,000; and 2010, $1,350,000.

FGDI leases various office space and grain storage facilities under year-to-year operating leases. Rental expense for these offices and facilities was approximately $217,000, $415,000, and $542,000 in 2003, 2004 and 2005, respectively. FGDI also rents equipment periodically throughout the year under day-to-day agreements. Rent expense for equipment and machinery was approximately $44,000, $48,000, and $51,000 in 2003, 2004 and 2005, respectively.

In the event the counterparty is unable to meet its contractual obligations, FCStone Trading may be exposed to the risk of purchasing energy related products at prevailing market prices. To mitigate this risk, FCStone Trading has purchased credit swap insurance that provides coverage of at least 1.43 times the counterparty exposure level and is reported as prepaid expenses.

FCStone Merchant Services has a noncancelable operating lease for office space in New Jersey. The lease is for an initial three year term expiring on June 30, 2007. The lease contains a renewal option for an additional five year term and requires payment of all executory costs, such as maintenance and liability insurance. Rent expense associated with this lease totaled approximately $11,000 and $66,000 in 2004 and 2005, respectively. Future minimum lease payments under the lease for the years subsequent to August 31, 2005 are: $66,000 in 2006 and $55,000 in 2007.

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

10. STOCKHOLDERS’ EQUITY

On March 1, 2005, the voting stockholder/members of the Company approved the restructuring of the Company by terminating the Company’s cooperative status and ending the patronage-based rights accruing to the Company’s members. Pursuant to the restructuring, stockholders and subscribers received on April 15, 2005, 500 shares of new common stock for each fully-paid share of Class A common stock, $5,000 par value, 10,000 shares of new common stock for each fully-paid share of Class B common stock, $100,000 par value, one share of new common stock for each $10.00 of paid subscription and one share of new common stock for each $10.00 par value of preferred stock held. Membership interests in the Company represented by patronage-based rights as of August 31, 2004, were converted on April 15, 2005 into (i) shares of new common stock based on an appraised value and relative patronage; and (ii) subscription rights exercisable at a purchase price of $10.00 per share within 60 days after the distribution of new common stock and subscription rights. The Company distributed 4,310,237 shares of new common stock on April 15, 2005 pursuant to the restructuring. The Company commenced the subscription rights offering on April 15, 2005 and the offering continued until June 29, 2005 with 174,372 shares sold and $1,743,720 of equity raised.

In June 2005, the Company formed an employee stock ownership plan (ESOP) and filed a Form S-8 Registration Statement in order to provide employee incentives and an additional capital infusion to the Company. Generally, employees of the Company or any participating affiliates who meet the criteria defined in the ESOP are eligible. Eligible participants were able to elect to make a one-time irrevocable transfer of a portion of their 401(k) Plan to the ESOP. The amount of the transfer was limited to no more than one-third (1/3) of the eligible participant’s 401(k) Plan account balance. The ESOP intends to operate on a plan year which corresponds to the calendar year. For plan years beginning after December 31, 2005, the Company will make matching contributions to the ESOP in an amount equal to 50% of each participant’s eligible elective deferral contribution to the 401(k) Plan. Dividends received with respect to shares of Company Stock allocated to participants’ accounts in the ESOP will be credited to such participants’ accounts annually on the basis of the number of shares of Company Stock allocated to each such participant’s account. The initial ESOP stock sale was consummated as of August 26, 2005, with the ESOP purchasing from the Company 448,692 shares of common stock at a purchase price of $10.00 per share, for an aggregate of $4,486,920. In the event a terminated plan participant, whether by death, disability, retirement or other termination, desires to sell his or her shares of Company stock, the Company may be required to purchase the shares from the participant at their appraised value at that time. To the extent that shares of common stock held by the ESOP are not readily tradeable, a sponsor must reflect the maximum cash obligation related to those securities outside of stockholders’ equity as temporary equity.

As of August 31, 2005, the shares held by the ESOP, fair value and maximum cash obligation were as follows:

Shares held by the ESOP		448,692
Fair value per share	$	10
Maximum cash obligation	$	4,486,920

On August 15, 2005, we purchased 103,922 shares of the common stock of the Company held by Farmland Industries pursuant to an auction held by Farmland’s liquidating trustee and the approval of the bankruptcy court. The aggregate purchase price for the purchase of these shares was $605,000, or $5.82 per share. We do not have a plan or program for the purchase of shares of the Company’s common stock.

Prior to September 1, 2004, the Company had an equity plan whereby each stockholder/member’s individual contribution to equity was determined by reference to its individual volume of futures business with

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

FCStone or grain merchandising business with FGDI. This was achieved by the distribution of noncash current patronage in the form of preferred stock. Current patronage was paid 40% in cash, with the balance allocated first to offset amounts unpaid on subscriptions for Class A common stock (Class B common stock was paid in full as a condition of membership); second, paid in the form of distribution of Series I preferred stock to meet minimum Series I preferred stock requirements as provided in the plan; third, paid in the form of distribution of Series II preferred stock for remaining FGDI patronage to meet minimum Series II preferred stock requirements as provided in the plan; and fourth, any remaining balance was payable in cash to the extent the board of directors determined that the Company had sufficient resources to make such payment consistent with prudent business practice. At August 31, 2004, the Company had 424 shares of Class A common stock issued of $2,120,000 and 125 shares of Class A common stock subscribed of $248,565.

11. NOTES PAYABLE

During 2005, the Company renewed its general corporate unsecured line of credit agreement with Deere Credit in the amount of $6,250,000. The availability of the line of credit is subject to annual review. The continued availability of this line of credit is subject to the Company’s financial condition and operating results continuing to be satisfactory to Deere Credit. Borrowings under this line are on a demand basis and bear interest at the prime rate established by Citibank, N.A. The Company’s borrowings outstanding under this line of credit at August 31, 2004 and 2005 was $8,250,000 and $4,250,000, respectively.

FCStone has an unsecured line of credit with Harris, N.A. (Harris) in the amount of $15.0 million. The availability of the line of credit at Harris is subject to annual review. The continued availability of this line of credit is subject to FCStone’s financial condition and operating results continuing to be satisfactory to Harris. Borrowings under this line are on a demand basis and bear interest at the prime rate as announced by Harris. There were no borrowings outstanding under this line of credit at August 31, 2004 or 2005.

FCStone has unsecured lines of credit with Deere Credit, Inc. in the amount of $47,750,000. The lines are comprised of a $40,750,000 margin call line, expiring March 1, 2006, and a $7.0 million subordinated debt line, expiring December 1, 2006. The margin call line of credit is subject to annual review, and continued availability of this line of credit is subject to the Company’s financial condition and operating results continuing to be satisfactory to Deere Credit, Inc. Borrowings under this line are on a demand basis and bear interest at 0.35% under the Prime rate or base rate of interest established by Citibank, N.A. There were no borrowings outstanding under this line of credit at August 31, 2004 and 2005. The subordinated revolving line of credit bears interest at the rate of 4.8% in excess of LIBOR. Unused portions of the credit facility require a commitment fee of  ¹/2 percent on the unused commitment. Borrowings outstanding under this line of credit were $4,000,000 at August 31, 2004 and 2005.

On March 25, 2005, FGDI entered into a new master loan agreement with National Bank for Cooperatives (CoBank). The agreement includes a revolving credit facility for an amount up to $68,000,000, to be used to finance inventory and receivables. The commitment expires October 1, 2005 and carries an interest rate on a variable basis indexed to CoBank’s national variable rate, as defined in the agreement. The agreement also includes a revolving term loan for an amount of up to $8,000,000, to be used to reimburse CoBank for any drafts that it may honor under issued letters of credit. The commitment expires October 1, 2006 and carries an interest rate on a variable basis indexed to CoBank’s national variable rate, as defined in the agreement. CoBank’s national variable interest rate was 5.68% at August 31, 2005. The credit facility and the term loan are secured by inventories, accounts receivable, and intangible properties. The master loan agreement requires FGDI to maintain an excess of current assets over current liabilities of not less than $6,500,000, as well as an excess of total assets

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

over total liabilities of not less than $10,000,000 at the end of each month and a ratio of total debt to working capital not to exceed 10:1 at the end of each month. Additionally, FGDI is required to have at the end of each fiscal year a “Fixed Charge Coverage Ratio,” as defined in the agreement, of not less than 15:1. FGDI was not in compliance with the annual fixed charge coverage ratio at August 31, 2005, but received a written waiver from CoBank for the fiscal year ended August 31, 2004. FGDI agrees to pay CoBank a commitment fee on the average daily unused portion of both commitments, payable quarterly in arrears. There was no outstanding balance on the term loan at August 31, 2005, however FGDI had a standby letter of credit of $158,983. The borrowings outstanding under the credit facility at August 31, 2004 and 2005 were $26,504,115 and $6,004,545, respectively. The master loan agreement with CoBank requires FGDI to acquire and maintain nonvoting participation certificates in CoBank, in amounts determined in accordance with CoBank’s bylaws and capital plan. These certificates are reported as investment in CoBank.

On May 25, 2005, the Company entered into agreements with AFG Trust Finance Limited and AFG Trust Assets Limited for a United States dollar (USD) credit facility and a Chinese RenMinBi (RMB) credit facility, as well as an USD investment facility and a RMB investment facility. The USD credit facility is for an amount up to $20,000,000 and the RMB credit facility is for an amount up to 160,000,000 RMB. The commitment expires May 25, 2006 and the USD credit facility carries an interest rate of the aggregate of the prime rate, as published by The Asian Wall Street Journal and ..75% per annum. The credit facility is secured by all of the interest and rights in respect of the USD and RMB investment facilities with AFG Trust Assets Limited. The aggregate principal amounts of all the borrowings outstanding shall not exceed the lesser of the facility amount and the available limit, to be calculated as defined in the agreement. The borrowings outstanding under the USD credit facility at August 31, 2004 and 2005 were $3,499,306 and $3,586,792, respectively. There are no commitment fees associated with this line of credit and there have been no borrowings outstanding under the RMB credit facility.

On June 29, 2004, FCStone Trading entered into a revolving credit facility with National Bank for Cooperatives, ACB (CoBank), in the amount of $15 million, which expired on June 30, 2005. This credit facility was renewed as two separate credit facilities. The first credit facility is for $7,500,000 and expires on December 30, 2005. The second credit facility is for $7,500,000 and expires on June 30, 2006. The purpose of this commitment is to provide funding for commodities risk management consulting services that FCStone Trading provides to its members, primarily the payment of option premiums and margin calls on hedge and swap transactions entered into by the FCStone Trading on behalf of members. It is also to provide funding for working capital requirements in funding hedged fuel inventory and accounts receivable under the Fuel Alliance Program. Amounts outstanding under these credit facilities will bear interest at  ¹/4 of 1% below the National Variable Rate established by CoBank from time to time. Unused portions of the credit facility require a commitment fee of  ¹/4 of 1% per annum. FCStone Trading is required to maintain at the end of each quarter $2.4 million in current assets in excess of current liabilities and $2.4 million of total assets in excess of total liabilities. FCStone Trading was not in compliance with the minimum adjusted working capital covenant as of August 31, 2004, but is in compliance as of August 31, 2005. FCStone Trading received a written waiver from CoBank covering the period from August 31, 2004 through November 30, 2004, when the non-compliance was remediated. The loan agreement with CoBank requires FGDI to acquire and maintain non-voting participation certificates in CoBank, in amounts determined in accordance with CoBank’s bylaws and capital plan. At August 31, 2004 and 2005 there were $1,950,000 and $0, respectively, amounts outstanding under the above credit facilities.

On April 15, 2002, FCStone Financial entered into a line of credit agreement with John Deere Credit, Inc. in the amount of $46.0 million, which expires on March 1, 2006. The line of credit carries an interest rate on a variable basis calculated based on the collateral quality of advances requested by the Company as defined in the agreement. The line of credit is secured by inventories and accounts receivable. FCStone Financial is required to maintain at the end of each month $1.0 million in current assets in excess of current liabilities as well as total

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

assets in excess of total liabilities. In addition, the FCStone Financial must obtain a Guaranty from the Company to meet minimum net worth levels of not less than $3.0 million at the end of each month and of not less than $3.5 million at the end of each fiscal year. The Company maintains a limited corporate guarantee with Deere Credit to meet this obligation. There were borrowings outstanding of approximately $1,300,000 and $17,800,000 under this line of credit at August 31, 2004 and 2005. As of August 31, 2004, FCStone Financial was not in compliance with the minimum working capital requirements. FCStone Financial obtained a waiver dated October 13, 2004 from the lender regarding this violation. The waiver covered all periods from August 31, 2004 through the investment of $25,000 by FCStone Group, Inc., which occurred on October 29, 2004. As of August 31, 2005, FCStone Financial was in compliance with the minimum working capital requirements.

On February 28, 2003, FCStone Financial entered into a line of credit agreement with CoBank, ACB in the amount of $75.0 million, which expires on April 30, 2006. Interest under the agreement will be determined separately at the time advances are requested. Under a subordination agreement dated February 28, 2003, borrowings under the line of credit with Deere Credit, discussed above, are subordinate to those under the line of credit with CoBank. FCStone Financial is required to maintain equity in excess of $0.75 million. In addition, the Company maintains a guarantee of payment agreement with CoBank with a maximum obligation of $1.5 million. The loan agreement requires FCStone Financial to acquire and maintain non-voting participation certificates in CoBank in amounts determined in accordance with CoBank’s bylaws and capital plan. These certificates are reported as other investments. There are no commitment fees associated with this line of credit, and the outstanding borrowings were approximately $-0- and $4,800,000 as of August 31, 2004 and 2005.

On March 4, 2004, FCStone Merchant Services entered into a junior, secured revolving credit facility with Sowood Commodity Partners Fund LP (Sowood), a related party, in the amount of $30.0 million. The purpose of this credit facility is to fund purchase, storage, hedging, financing and sale of commodities. In accordance with the agreement, any financing debt under this credit facility that is incurred by FCStone Merchant Services in the ordinary course of business to fund the purchase or financing of any permitted commodity is subordinated in right of payment to any senior debt. The maturity date for each advance is on, or prior to, the 364 ^th day after the closing date of the advance. Each advance accrues daily interest at a rate of the greater of (i) the interest rate specified in the borrowing request; or (ii) the interest rate agreed to in writing by Sowood and FCStone Merchant Services prior to the closing date for the advance. A commitment fee, based on the amount requested multiplied by 1%, is due to Sowood only in instances where a borrowing that has been approved does not occur. FCStone Merchant Services is required to maintain at all times, tangible net worth, as defined per agreement, of not less than $1.5 million and net working capital of not less than $1.5 million. There were no borrowings outstanding under this credit facility at August 31, 2004 and 2005.

On February 25, 2005, FCStone Merchant Services amended its line of credit agreement with RZB Finance (RZB), increasing the available line amount to $8.0 million. The purpose of this credit facility is for short-term advances (Loans) and issuance of commercial letters of credit (L/C’s), which shall be used to finance the purchase of inventory and accounts receivable arising from the sale of inventory. Each Loan is payable on demand, and in no event shall be outstanding for more than 180 days. Interest on Loans is payable monthly, as determined in accordance with the terms of the agreement. Each L/C shall have an expiration date not more than 180 days after its date of issuance. Each L/C is charged a fee, upon issuance, in an amount equal to the greater of: (i) a flat fee of $500 or (ii) a fee equal to 2.5% of the maximum face amount of the L/C. FCStone Merchant Services is required to maintain at all times tangible net worth, as defined per agreement, of $2,500,000. There were no borrowings outstanding under this line of credit at August 31, 2004 and 2005.

On May 10, 2004, FCStone Merchant Services entered into an uncommitted line of credit agreement with Fortis Capital Corp. (Fortis) in the amount of $20.0 million, to be used for loans, documentary letters of credit and standby letters of credit. Each loan or letter of credit shall be used to finance self-liquidating transactions

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FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

involving the purchase, storage, hedging, and sale of grains, crude oil, natural gas, and petroleum products that are traded on commodities exchanges, as well as, repurchase agreements with counterparties acceptable to Fortis. All loans are payable on demand, and in no event shall be outstanding for more than 74 days after the date made, unless agreed by Fortis. Loans under the facility bear interest at a rate determined in accordance with the terms of the agreement. All letters of credit shall have expiration dates not later than 74 days after the issuance date, unless agreed by Fortis. The fees for issuing a documentary letter of credit under the facility are: the greater of $500 or  ¹/4 of 1% flat per 74-day period or part thereof, payable in advance. In addition, a negotiation fee of 1/10 of 1% of the amount of each drawing under each letter of credit, payable upon drawing. The fees for issuing each trade standby letter of credit and each financial standby letter of credit shall be not less than a fee at a rate of 2.0% and 2.50%, respectively, of the daily average maximum undrawn face amount of each such standby letter of credit during the period from the date of issuance through the date of expiration. FCStone Merchant Services is required to maintain at all times, working capital of not less than $2.5 million and the ratio of total outstanding loans and extensions of credit from all banks and institutions to tangible net worth, as defined per agreement, not to exceed 12.5 to 1.0. There are no commitment fees associated with this uncommitted line of credit, and there were no borrowings outstanding under this line of credit at August 31, 2004 and 2005.

On November 23, 2004, FCStone Merchant Services entered into an uncommitted line of credit agreement with UFJ Bank Limited (UFJ) in the amount of $10.0 million, to be used for loans, commercial letters of credit and standby letters of credit. Each loan or letter of credit shall be used to finance self-liquidating transactions involving the purchase, storage, hedging, and sale of grains, crude oil, natural gas, and petroleum products that are traded on commodities exchanges, as well as repurchase agreements with counterparties acceptable to UFJ. FCStone Merchant Services’ obligations to UFJ is secured by security interests in assets relating to such transaction, including, without limitation, all of the present and future accounts and loan receivable and assets of such counterparty. All loans are payable on demand, an in no event shall be outstanding for more than 364 days after the date made. Loans under the facility bear interest at a rate determined in accordance with the terms of the agreement. All letters of credit shall have expiration dates not later than 364 days after the issuance date. The fees for issuing commercial letters of credit include a flat fee equal to the greater of twelve and one-half basis points of the maximum face amount for each ninety day period or $250, payable upon issuance. In addition, a negotiation fee of the greater of twelve and one-half basis points of the amount of the drawing or $250, is payable upon drawing. The fees for issuing each standby letter of credit shall be the greater of $250 for each ninety day period, or a fee calculated at a rate per annum equal to one percent of the daily average maximum face amount of each letter during the period from the date of issuance through the expiration date, payable quarterly, in arrears. There are no commitment fees associated with this uncommitted line of credit, and there were no borrowings outstanding under this line of credit at August 31, 2005.

12. LETTERS OF CREDIT

FCStone Trading is required to provide letters of credit to certain customers and counterparties that can be drawn upon if there is a loss on the OTC contracts. FCStone Trading has provided these letters of credit under agreements with CoBank. As of January 29, 2002, an agreement was entered into for $3,000,000, which matured on October 31, 2004. As of August 6, 2002, another agreement was entered into for $500,000, which matured on September 30, 2004. The final agreement was entered into on July 30, 2004, for $1,250,000, which matured on January 31, 2005. To date, no counterparties have drawn down on these facilities. Under the agreements, FCStone Trading was required to pay commitment fees in advance, which were recorded as prepaid expenses and recognized over the life of the respective letters of credits.

During 2003, the City of Mobile, Alabama, issued $5,500,000 of Industrial Development Revenue Bonds (Bonds) related to the construction of grain bins (see note 8), of which $4,125,000 remains outstanding. FGDI is

F-23

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

required to maintain a bank letter of credit in the amount of approximately $4,500,000, which expires on August 31, 2006, subject to required renewal, to secure the Bonds. FGDI agrees to pay a standby letter of credit fee, payable annually and charged to interest expense ratably.

FCStone Merchant Services provides credit support on behalf of certain customers using arrangements such as documentary and standby letters of credit (see note 10). These arrangements enable customers to execute transactions or obtain desired financial arrangements with third parties. Should the customer fail to perform under the terms of the transaction or financing arrangement, FCStone Merchant Services would be required to perform on their behalf. The length of these credit support arrangements parallels the length of the related financing arrangements or transactions. FCStone Merchant Services has issued letters of credit in the amount of $4,950,000 and $7,417,000 at August 31, 2004 and 2005, respectively.

13. SUBORDINATED DEBT

In addition to the $4,000,000 subordinated debt with Deere Credit (see note 10), during 2004 and 2005, FCStone entered into several subordinated notes with various individuals, amounting to $1,750,000 and $1,500,000 at August 31, 2004 and 2005, respectively (see note 15). The notes are variable rate notes, and bear interest at a rate equal to the prime rate as published in The Wall Street Journal, which was 6.5% at August 31, 2005. The notes mature on December 31, 2005, and are subordinated as defined by Commodity Futures Trading Commission Regulations.

14. CONTINGENCIES

The Company, from time to time, is involved in various legal matters considered normal in the course of its business. It is the Company’s policy to accrue for amounts related to these matters if it is probable that a liability has been incurred and an amount can be reasonably estimated. Although the outcome of such matters cannot be predicted with certainty and no assurances can be given with respect to such matters, the Company believes that the outcome of these matters in which it is currently involved will not have a materially adverse effect on its results of operations, liquidity, or financial position except as discussed below.

During 2004, FCStone LLC received approximately $600,000 in subrogation payments which were reimbursements for legal expenses incurred in previous years. Such amounts are reflected as a reduction of other expenses in the accompanying statement of operations.

On August 21, 2003, August 21, 2003, September 23, 2003, October 16, 2003, and July 16, 2004, Euro-Maritime Chartering, Inc. filed five separate claims under the arbitration facility established by the London Maritime Arbitrators Association of London, England, alleging a breach by FGDI, LLC of charter party agreements regarding four vessels and seeking to recover damages of $242,655, $311,663, $769,302, and $561,854, respectively. The amount of the July 16, 2004 claim is not yet stated. Euro-Maritime Chartering alleges that these damages arise from detention and demurrage encountered at China ports with respect to cargos that FGDI sold to Chinese buyers. FGDI does not dispute the demurrage claims, which are estimated to total approximately $690,000. FGDI claims that, under the sales contract with the Chinese buyers, any detention and demurrage charges were for the account of the buyers. FGDI has collected deposits from the Chinese buyers in the total amount of $669,436, which is being held pending resolution of the detention claims. FGDI intends to vigorously defend the detention claims. If the claimant prevails on any of the detention claims, or otherwise in amounts above the corresponding deposit, FGDI expects to seek collection of such amounts from the buyers.

On November 13, 2003, Liaoyang Edible Oils filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds, and Fats Association Ltd. of Hong Kong alleging breach of a sales

F-24

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

contract by FGDI and seeking to recover damages of $1,125,000, of which $55,475 is undisputed. Liaoyang Edible Oils alleges that these damages arise out of disputes related to the final pricing of the contract. FGDI intends to vigorously defend the claim.

On December 9, 2004, Xiamen Zhonge Industry Co., Ltd. (Xiamen) filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong. Xiamen’s claim alleges that FGDI breached its duty to accept pricing instructions provided by Xiamen to FGDI. FGDI has submitted a statement of defense and counterclaim, to which Xiamen has replied with a modified claim. FGDI intends to vigorously defend this claim.

Management is currently unable to predict the outcome of these claims and believes their current status does not warrant accrual under the guidance of Statement on Financial Accounting Standards No. 5, Accounting for Contingencies, since the amount of any liability is neither probable nor reasonably estimable. As such, no amounts have been accrued in the financial statements. Management intends to vigorously defend these claims and will continue to monitor the result of arbitration and assess the need for future accruals.

15. ACCOUNTS RECEIVABLE

During the first quarter ended November 30, 2004, an FGDI customer located in Mexico failed to make timely payment on a portion of its $24.5 million of receivables. An $8.0 million portion of these receivables was previously sold to CoBank, ACB, leaving $16.5 million of receivables with the Company. The Company filed claims under its credit insurance policy issued by Export Import Bank of the United States (EXIM) and a commercial credit insurance policy. In April, 2005, the Company recovered $23.5 million from these insurers. The insurance payments were applied to fully satisfy the interest of the third party purchaser and to partially offset the amounts due under the Company’s remaining receivable. As a result, the Company’s loss from this default was $1.0 million. The Company recognized the loss through a $0.7 million charge to bad debt expense during the current fiscal year in addition to $0.3 million previously recorded for this matter.

Another FGDI customer located in Mexico failed to make timely payment on accounts owed to the Company in the amount of $2.9 million. Although this customer has subsequently provided a mortgage on real estate located in Mexico, based on available information, it appears probable that the Company will be unable to collect the amount due. As a result, the Company’s loss from this default is approximately $2.9 million, which has been recognized as a charge to bad debt expense during the current fiscal year.

The Company continues to conduct business with other customers in Mexico, and expects no difficulties with collections on existing accounts.

16. TRANSACTIONS WITH AFFILIATED COMPANIES

FCStone has entered into an agreement with FCTC to provide management services, including accounting, administrative, personnel, and office space. The Company receives a monthly fee plus 15% of net earnings of FCTC, which totaled approximately $180,000, $207,000, and $231,000 in 2003, 2004 and 2005, respectively.

During 2004, the Company loaned $1,000,000 to two individuals who subsequently loaned the monies in the form of subordinated debt to FCStone LLC creating a financial interest which is required to enable FCStone LLC to execute transactions through seats held by these individuals on the Chicago Mercantile Exchange. During 2005, one note for $500,000 was paid off and replaced by another note for $500,000. At August 31, 2004 and 2005, $1,000,000 was outstanding under this arrangement, respectively.

F-25

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

17. FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, commodity and accounts and note receivables, marketable securities and payables contained in the Consolidated Statements of Financial Condition approximates their fair values due to the short-term nature of these instruments. Short-term borrowings and obligations under capital lease have variable rates which approximate fair value.

The fair value estimates presented herein are based on pertinent information available to management as of August 31, 2004 and 2005. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may be different significantly from the amounts presented herein.

18. OPERATING SEGMENT INFORMATION

The Company reports its operating segments based on services provided to customers, which includes Commodity and Risk Management Services, Clearing and Execution Services, Grain Merchandising, and Financial Services. The Commodity and Risk Management Services segment offers commodity services to its customers, with an emphasis on risk management using futures, options, and other derivative instruments. The Clearing and Execution Services segment offers low-cost clearing and direct execution services to commodities firms, fund operators, commodities traders and others. The Grain Merchandising segment acts as a dealer in, and manager of, physical grain and fertilizer in the United States and international markets. The Financial Services segment offers financing and facilitation for customers to carry grain and other commodities.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates individual segment performance based on segment income or loss defined as the respective segment’s portion of the total Company’s income before taxes and minority interest.

Reconciling Amounts represent the elimination of interest income and expense, and commission income and expense between segments. Such transactions are conducted at market prices to more accurately evaluate the profitability of the individual business segments. Additionally, certain assets consisting primarily of commodity deposits and accounts receivable, notes receivable, and amounts due from affiliates between segments have been eliminated.

F-26

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table represents the significant items by operating segment for the results of operations for the years ended August 31, 2003, 2004 and 2005, respectively:

	Commodity & Risk Management Services		Clearing & Executive Services		Grain Merchandising			Financial Services			Corporate & Other			Reconciling Amounts			Total
	(in thousands)
2003
Total revenues	$	108,827	$	26,880	$	1,096,015		$	2,287		$	192		$	(1,445	)	$	1,232,756
Interest revenues		2,104		1,304		51			1,303			—			(152	)		4,610
Interest expense		113		37		1,907			1,133			2			(152	)		3,040
Income (loss) before minority interest and income taxes		6,676		947		1,869			109			(3,535	)		—			6,066
Total assets		124,669		265,796		99,770			16,571			4,568			(6,641	)		504,733
2004
Total revenues	$	156,122	$	40,484	$	1,426,846		$	2,517		$	80		$	(1,735	)	$	1,624,314
Interest revenues		1,345		1,412		68			1,519			10			(372	)		3,982
Interest expense		114		193		3,168			1,262			53			(372	)		4,418
Income (loss) before minority interest and income taxes		7,907		3,359		2,230			(447	)		(4,029	)		—			9,020
Total assets		212,430		289,651		98,306			5,244			10,836			(12,640	)		603,827
2005
Total revenues	$	83,713	$	53,377	$	1,240,547		$	25,775		$	157		$	(1,722	)	$	1,401,847
Interest revenues		3,131		4,124		153			1,128			125			(484	)		8,177
Interest expense		73		337		2,849			937			234			(484	)		3,946
Income (loss) before minority interest and income taxes		11,160		5,152		(2,037	)		556			(4,800	)		—			10,031
Total assets		356,979		380,422		75,869			28,554			8,887			(45,189	)		805,522

A summary of the Company’s consolidated revenues by geographic area is presented below:

	Consolidated Revenues(1) (000’s)
	2003		2004		2005
United States	$	582,029	$	883,159	$	692,556
China		289,425		433,849		553,393
Japan(2)		205,505		90,009		—
Canada		76,497		79,874		59,868
Mexico		41,111		96,661		63,491
Other countries		38,189		40,762		32,539
Total	$	1,232,756	$	1,624,314	$	1,401,847

(1) Revenues are attributed to countries based on location of customer.

(2) In 2005, no revenues were attributed to a customer located in Japan. As a result of a change in the customer’s organizational structure, the 2005 revenues were attributed to the customer’s U.S. based affiliated entity

F-27

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Mitsubishi is a significant customer for grain sold by FGDI, accounting for 10%, 6%, and 6% of consolidated total revenues for the years ending August 31, 2003, 2004 and 2005, respectively.

19. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly data is set forth in the following table (in thousands).

	Quarter
	First		Second		Third		Fourth		Total
2004
Total Revenues	$	458,738	$	405,246	$	414,414	$	345,916	$	1,624,314
Income (loss) before minority interest and income taxes		2,568		2,605		2,683		1,164		9,020
Net income		1,878		1,953		1,824		759		6,414
2005
Total Revenues	$	445,489	$	346,090	$	315,370	$	294,898	$	1,401,847
Income (loss) before minority interest and income taxes		1,572		3,222		3,552		1,685		10,031
Net income		930		1,746		2,226		1,678		6,580

20. SUBSEQUENT EVENTS

After year-end, FGDI’s agreement with CoBank related to the revolving credit facility has been extended from October 1, 2005, up to and including January 1, 2006, with all other terms of the supplement remaining the same. Additionally, FGDI’s agreement with CoBank related to the revolving term loan has been extended from October 1, 2006, up to and including January 1, 2007, with other terms of the supplement remaining the same.

Subsequent to the year end, a claim for certain physical damage to the newly constructed Mobile facilities against FGDI’s own insurers was settled for $570,500. Such settlement does not cover the damage to the underlying foundation, the costs of any remediation of any foundation defects, or loss of use or other consequential damages.

On October 27, 2005, the Company’s board of directors declared a dividend of $0.60 per share on the 4,828,279 shares outstanding. The stock record date for such dividend payment was October 27, 2005 and the payment date is December 22, 2005.

F-28

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except share amounts)

	August 31, 2005			May 31, 2006
				(Unaudited)
ASSETS
Cash and cash equivalents
Unrestricted	$	25,145		$	44,609
Restricted		1,410			1,454
Segregated		10,509			17,691
Commodity accounts receivable
Commodity exchanges and clearing organizations—customer segregated, including United States treasury bills and notes		396,446			542,967
Proprietary commodity accounts		18,028			18,722
Customer regulated accounts in deficit secured by U.S. treasury bills and notes		6,351			4,688
Total commodity deposits and accounts receivable		420,825			566,377
Marketable securities, at fair value—customer segregated and other		192,328			272,252
Accounts receivable and advances on grain		110,246			169,463
Notes receivable		9,632			28,900
Inventories—grain, fertilizer, and fuel		14,605			34,112
Exchange memberships and stock, at cost		1,797			6,129
Furniture, equipment and improvements, net		8,206			7,913
Deferred income taxes		4,013			4,843
Investments in affiliates		1,726			1,702
Investments in other organizations		1,843			1,995
Other assets		3,237			6,122
Total Assets	$	805,522		$	1,163,562
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Checks written in excess of bank balance	$	4,880		$	5,116
Commodity and customer regulated accounts payable		549,200			756,032
Trade accounts payable and advances		129,715			219,967
Accrued expenses		20,764			26,501
Notes payable		36,911			83,403
Subordinated debt		5,500			7,000
Obligations under capital leases		4,125			3,713
Total Liabilities		751,095			1,101,732
Minority interest		4,755			3,463
Redeemable common stock held by employee stock ownership plan (note 7)		4,487			6,079
Stockholders’ equity:
Common stock, no par value, authorized 20,000,000, issued and outstanding 4,828,279 at August 31, 2005 and 4,845,736 shares at May 31, 2006		21,524			21,747
Accumulated other comprehensive loss		(4,555	)		(4,555	)
Retained earnings		32,703			41,175
		49,672			58,367
Less maximum cash obligation related to ESOP shares (note 7)		(4,487	)		(6,079	)
Total stockholders’ equity		45,185			52,288
Commitments and contingencies (note 6)
Total liabilities and stockholders’ equity	$	805,522		$	1,163,562

See notes to consolidated financial statements.

F-29

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)

	Three Months Ended May 31,					Nine Months Ended May 31,
	2005		2006			2005		2006
Revenues:
Commissions and clearing fees	$	18,914	$	27,795		$	54,840	$	74,635
Service, consulting and brokerage fees		5,215		9,170			13,244		24,598
Interest		2,342		6,033			5,269		15,277
Other		2,695		1,314			4,720		2,480
Sales of commodities		286,204		314,486			1,028,876		860,678
Total revenues		315,370		358,798			1,106,949		977,668
Costs and expenses:
Cost of commodities sold		282,418		311,194			1,015,435		848,480
Employee compensation and broker commissions		8,041		11,014			24,000		30,663
Pit brokerage and clearing fees		8,502		12,617			23,900		33,626
Introducing broker commissions		3,726		6,373			9,890		15,575
Employee benefits and payroll taxes		2,148		2,608			5,990		7,292
Interest		1,540		1,601			2,895		4,335
Depreciation		390		424			1,147		1,214
Bad debt expense		133		1,304			1,163		1,709
Other expenses		4,920		5,640			14,183		16,824
Total costs and expenses		311,818		352,775			1,098,603		959,718
Income before income tax expense and minority interest		3,552		6,023			8,346		17,950
Minority interest		26		(378	)		494		(370	)
Income after minority interest and before income tax expense		3,526		6,401			7,852		18,320
Income tax expense		1,300		2,350			2,950		6,950
Net income	$	2,226	$	4,051		$	4,902	$	11,370
Basic and diluted shares outstanding (note 4)		4,323		4,830			4,315		4,829
Basic and diluted earnings per share (note 4)	$	0.51	$	0.84		$	1.14	$	2.35

See notes to consolidated financial statements.

F-30

FCSTONE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Nine Months Ended May 31,
	2005			2006
Cash flows from operating activities:
Net income	$	4,902		$	11,370
Depreciation		1,147			1,214
Minority interest, net of distributions		261			(1,292	)
Equity in earnings of affiliates		—			18
Change in commodity accounts receivable/payable, marketable securities and customer segregated funds, net		(3,592	)		(25,826	)
(Increase) decrease in accounts receivable and advances on grain		10,289			(59,217	)
Increase in inventories—grain, fertilizer, and fuel		(8,782	)		(19,507	)
Increase in other assets		(3,454	)		(3,867	)
Increase in accounts payable and advances		25,627			90,252
Increase (decrease) in accrued expenses		(287	)		5,737
Net cash (used in) provided by operating activities		26,111			(1,118	)
Cash flows from investing activities:
Purchase of furniture, equipment, and improvements		(766	)		(921	)
Issuance of notes receivable, net		(5,133	)		(19,268	)
Purchase of exchange memberships and stock		(925	)		(4,945	)
Proceeds from the sale of exchange memberships and stock		—			613
Distributions from affiliates		—			6
Net cash used in investing activities		(6,824	)		(24,515	)
Cash flows from financing activities:
Increase (decrease) in checks written in excess of bank balance		(4,386	)		236
Proceeds from notes payable, net		9,442			46,492
Proceeds from issuance of common stock		735			—
Proceeds from issuance of redeemable common stock held by ESOP		—			223
Payment for redemption of stock		(8	)		—
Dividends paid		—			(2,898	)
Payment of prior year patronage		(1,869	)		—
Payments under capital lease		(412	)		(412	)
Monies deposited in escrow		—			(44	)
Proceeds from subordinated debt		2,000			4,500
Payments on subordinated debt		(2,250	)		(3,000	)
Net cash provided by financing activities		3,252			45,097
Net increase in cash and cash equivalents—unrestricted		22,539			19,464
Cash and cash equivalents—unrestricted—beginning of period		7,943			25,145
Cash and cash equivalents—unrestricted—end of period	$	30,482		$	44,609
Supplemental disclosures of cash flow information:
Interest paid	$	2,794		$	3,995
Income taxes paid	$	2,971		$	7,596
Non-cash financing activities:
Increase in maximum cash obligation related to ESOP shares	$	—		$	1,368

See notes to consolidated financial statements.

F-31

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS

BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The consolidated financial statements of FCStone Group, Inc. and subsidiaries (the Company) included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and represent the consolidation of all companies in which the Company has a controlling interest. The Company also has minority holdings in three other entities, all of which are accounted for under the equity method. Certain information and disclosures normally included in comprehensive financial statements, prepared in accordance with U.S. generally accepted accounting principles (US GAAP), have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the financial statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows for the periods presented. These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s amended annual report on Form 10-K/A for the Company’s fiscal year ended August 31, 2005, as filed with the Securities and Exchange Commission on May 26, 2006.

USE OF ESTIMATES

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, the Financial Accounting Standards Board issued Statement on Financial Accounting Standards No. 123R, Share-Based Payment, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based transactions. This statement is a revision to Statement on Financial Accounting Standards No. 123 and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This statement will require measurement of the cost of employee services received in exchange for stock compensation based on the grant-date fair value of the employee stock options. Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company will adopt this Statement prospectively on September 1, 2006. The Company will recognize compensation costs for new grants of share-based awards, awards modified after the effective date, and the remaining portion of the fair value of unvested awards at the adoption date. The adoption of this statement will not have a significant effect on the Company’s financial statements.

RECLASSIFICATIONS

Certain amounts, as reported in the prior year’s financial statements, have been reclassified to conform with the current year presentation.

2. PENSION PLANS

The Company has a noncontributory retirement plan, which is a defined benefit plan that covers substantially all employees. Effective April 1, 2006, such plan was closed to new employees hired subsequent to

F-32

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

the April 1, 2006 date. Additionally, the Company has a nonqualified noncontributory retirement plan covering certain executive employees. The Company’s policy is to fund amounts that are intended to provide for benefits attributed to service to date. Pension expense for the three and nine month periods ended May 31, 2005 and 2006 for the defined benefit plans consists of the following components:

	Three months ended May 31,				Nine months ended May 31,
	2005		2006		2005		2006
Service cost	$	427,232	$	510,882	$	1,281,696	$	1,532,646
Interest cost		285,950		328,755		857,850		986,265
Less expected return on plan assets		243,076		306,231		729,228		918,693
Net amortization and deferral		109,733		229,776		329,199		689,328
Net periodic pension expense	$	579,839	$	763,182	$	1,739,517	$	2,289,546

3. INVENTORIES

Grain inventories are carried at market value, which is net realizable value (NRV). NRV is determined by estimating selling prices in the applicable market location and related costs of disposal in the ordinary course of business. Realized and unrealized gains and losses on futures contracts are credited or charged to current cost of sales.

Fertilizer inventory is recorded at the lower of cost or market using the first-in, first-out method.

Fuel inventory is recorded at the lower of cost or market using the weighted average method. The Company has shifted its focus from handling physical fuels, and now periodically participates, as a principal, in only back-to-back ethanol transactions; as a result the Company held no fuel inventory at May 31, 2006, and does not intend to do so in the future.

A summary of inventories as of August 31, 2005 and May 31, 2006 are as follows:

	August 31, 2005		May 31, 2006
Grain	$	13,507,493	$	32,448,710
Fertilizer		633,293		1,663,457
Fuel		464,315		—
	$	14,605,101	$	34,112,167

4. EARNINGS PER SHARE

Earnings per share has been presented in the accompanying Consolidated Statement of Operations. Basic earnings per shares excludes dilution and is computed by dividing the applicable net earnings by the weighted average number of common shares outstanding for the period. Diluted earnings per share is calculated based on the weighted average shares of common stock as adjusted for the potential dilutive effect of stock options as of the date of the Consolidated Statement of Financial Condition. Stock-based compensation arrangements, including options, are considered to be outstanding as of the grant date for purposes of computing diluted earnings per share. For the nine-month period ended May 31, 2006 computation, 400,000 stock options (see Notes 8 and 9) were excluded from the calculation of weighted average shares for diluted EPS because they were

F-33

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

not outstanding as of the date of the Consolidated Statement of Financial Condition. The calculation of the basic and diluted shares outstanding for the three-month and nine-month periods ended May 31, 2005, assumes the shares issued as a result of the restructuring (see Note 7) had been issued and outstanding for the full year.

5. OPERATING SEGMENT INFORMATION

The Company reports its operating segments based on services provided to customers, which includes Commodity and Risk Management Services, Clearing and Execution Services, Grain Merchandising, and Financial Services. The Commodity and Risk Management Services segment offers commodity services to its customers, with an emphasis on risk management using futures, options and other derivative instruments traded on exchanges and through over-the-counter (OTC) markets. The Clearing and Execution Services segment offers low-cost clearing and direct execution services to commodities firms, fund operators, commodities traders and others. The Grain Merchandising segment acts as a dealer in, and manager of, physical grain and fertilizer in the United States and international markets. The Financial Services segment offers financing and facilitation for customers to finance the purchase of commodities.

Reconciling Amounts represent the elimination of interest income and expense, and commission income and expense between segments. Such transactions are conducted at market prices to more accurately evaluate the profitability of the individual business segments. Additionally, certain assets consisting primarily of commodity deposits and accounts receivable, notes receivable, and amounts due from affiliates between segments have been eliminated.

F-34

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table presents the significant items by operating segment for the results of operations for the three and nine month periods ended May 31, 2005 and 2006, respectively, and the Statement of Financial Condition data as of those dates (in thousands):

	Commodity & Risk Management Services		Clearing & Execution Services		Grain Merchandising			Financial Services			Corporate & Other			Reconciling Amounts			Total
Three Months Ended May 31, 2005
Total revenues	$	22,846	$	14,513	$	272,624		$	5,813		$	25		$	(451	)	$	315,370
Interest revenue		959		1,128		24			377			24			(170	)		2,342
Interest expense		20		87		1,212			320			71			(170	)		1,540
Income (loss) before minority interest and income taxes		2,451		2,062		196			(12	)		(1,145	)		—			3,552
Total assets		227,645		293,670		92,349			16,234			7,923			(25,267	)		612,554
May 31, 2006
Total revenues	$	21,541	$	21,505	$	300,675		$	15,587		$	116		$	(626	)	$	358,798
Interest revenue		2,744		2,508		192			865			80			(356	)		6,033
Interest expense		50		97		961			720			129			(356	)		1,601
Income (loss) before minority interest and income taxes		6,056		3,281		(1,193	)		(1	)		(2,120	)		—			6,023
Total assets		517,554		560,735		86,979			51,678			13,333			(66,717	)		1,163,562
Nine Months Ended May 31, 2005
Total revenues	$	61,343	$	38,268	$	984,501		$	24,001		$	67		$	(1,231	)	$	1,106,949
Interest revenue		1,902		2,717		103			843			64			(360	)		5,269
Interest expense		44		218		2,141			690			162			(360	)		2,895
Income (loss) before minority interest and income taxes		6,067		3,787		1,253			552			(3,313	)		—			8,346
Total assets		227,645		293,670		92,349			16,234			7,923			(25,267	)		612,554
May 31, 2006
Total revenues	$	61,270	$	57,385	$	832,987		$	27,990		$	141		$	(2,105	)	$	977,668
Interest revenue		6,087		7,234		425			2,652			160			(1,281	)		15,277
Interest expense		87		251		2,758			2,229			291			(1,281	)		4,335
Income (loss) before minority interest and income taxes		15,731		8,483		(911	)		(102	)		(5,251	)		—			17,950
Total assets		517,554		560,735		86,979			51,678			13,333			(66,717	)		1,163,562

6. CONTINGENCIES

On August 21, 2003, August 21, 2003, September 23, 2003, October 16, 2003, and July 16, 2004, Euro-Maritime Chartering, Inc. filed five separate claims under the arbitration facility established by the London

F-35

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Maritime Arbitrators Association of London, England, alleging a breach by FGDI, LLC (FGDI) of charter party agreements regarding five vessels and seeking to recover damages of $242,655, $230,863, $769,302, $649,031 and $403,167, respectively. Euro-Maritime Chartering alleges that these damages arise from detention and demurrage encountered at China ports with respect to cargos that FGDI sold to Chinese buyers. FGDI does not dispute the demurrage claims, which are estimated to total approximately $690,000. FGDI claims that, under the sales contracts with the Chinese buyers, any detention and demurrage charges were for the account of the buyers. FGDI has collected deposits from the Chinese buyers in the total amount of $669,436, which are being held pending resolution of the detention claims. FGDI intends to vigorously defend the detention claims and believes that it has meritorious defenses. If the claimant prevails on any of the detention claims, or otherwise in amounts above the corresponding deposit, FGDI expects to seek collection of such amounts from the buyers.

On December 13, 2003, Liaoyang Edible Oils filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong alleging a breach of a sales contract by FGDI and seeking to recover damages of $1,125,000, of which $55,475 was not disputed as due under the contract. Liaoyang Edible Oils alleged that these damages arose out of disputes related to the final pricing of the contract. On December 15, 2005 the arbitration panel rendered a decision, dismissing the claim for pricing damages, but also doing its own accounting under the contract, and making an award to claimant, including interest and arbitration costs, of approximately $275,000. A partial award of attorneys’ fees and costs was also rendered in the decision, although this amount is yet to be quantified. FGDI has made an accrual related to this claim. On January 25, 2006, the claimant filed an appeal, which under the arbitration rules governing this dispute, is deemed to be a request for a new hearing. FGDI intends to cross appeal as to the amount awarded to the claimant by the arbitration panel.

In September 2004, Nantong Baogang Oils and Fats Development Co Ltd (Nantong Baogang) filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds, and Fats Association Ltd. of Hong Kong (FOSFA) requiring FGDI to return a refundable deposit of $603,741, which was paid by Nantong Baogang, plus interest and costs. FGDI does not dispute that Nantong Baogang is entitled to refund of the deposit, rather that the deposit be subject to FGDI’s right to set off against sums payable by Nantong Baogang to FGDI under a second arbitration. FGDI filed a claim in arbitration under the arbitration facility established by the FOSFA seeking to recover demurrage of $480,783 plus interest and costs. FGDI subsequently tendered to Nantong Baogang the net balance. On February 28, 2006, the first arbitration panel issued an award, ordering FGDI to repay the deposits plus an amount for interest and legal costs. On May 8, 2006, FGDI filed a notice of appeal against the award, and asked the appeal board to set aside the award pending the second arbitration panel’s decision on the demurrage claim filed by FGDI, that as of June 27, 2006 had been drafted and is expected to be available shortly. FGDI expects that the two claims will substantially offset each other, and that the resolution of these matters will not have a material effect on FGDI and its financial condition.

On December 9, 2004, Xiamen Zhonge Industry Co., Ltd. (Xiamen) filed a claim in arbitration under the arbitration facility established by the Federation of Oils, Seeds and Fats Associations Ltd. of Hong Kong. Xiamen’s claim alleges that FGDI breached its duty to accept pricing instructions provided by Xiamen to FGDI. FGDI has submitted a statement of defense and counterclaim. Xiamen has subsequently rescinded its original claim and FGDI expects to receive a modified claim, but has not at this time. FGDI intends to vigorously defend this claim.

On April 19, 2006, the Company was informed that a grain merchandising customer located in Montgomery, Alabama, with whom we have outstanding receivables of approximately $1.1 million, filed Chapter 11 bankruptcy on April 18, 2006. The Company is reviewing our legal alternatives and position in the bankruptcy proceedings. During the current three-month period ended May 31, 2006, the Company has charged $1.1 million to bad debt expense related to this customer.

F-36

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

On May 23, 2006, a former customer, Watseka Farmers Grain Cooperative Company, filed an action in the United States District Court, Central District of Illinois seeking actual damages, interest, punitive damages and general relief relating to losses on allegedly improper speculative trades ordered by the former general manager of the customer in a commodity futures account at FCStone, LLC. The customer was placed under supervision by Illinois state authorities in May 2004, after examination revealed deficiencies in its financial reporting and condition, and its assets were subsequently sold. The Company intends to vigorously defend this claim.

Management is currently unable to predict the outcome of these claims and, with the exception of the claim in which an arbitration panel has rendered a decision and the accounts receivable charged to bad debt expense, believes their current status does not warrant accrual under the guidance of Statement on Financial Accounting Standards No. 5, Accounting for Contingencies, since the amount of any liability is neither probable nor reasonably estimable. As such, with the exception of the amount recorded as a result of the arbitration panel’s decision, no amounts have been accrued in the financial statements. The Company intends to vigorously defend these claims and will continue to monitor the results of arbitration and assess the need for future accruals.

From time to time and in the ordinary course of its business, we are a plaintiff or are a defendant in other legal proceedings related to various issues, including worker’s compensation claims, tort claims and contractual disputes. With the exception of the matters discussed above, we are not aware of other potential claims that could result in the commencement of material legal proceedings. We carry insurance that provides protection against certain types of claims, up to the policy limits of our insurance. In the opinion of management, liabilities, if any, arising from existing litigation and claims will not have a material effect on the Company’s earnings, financial position or liquidity.

7. RESTRUCTURING AND EMPLOYEE STOCK OWNERSHIP PLAN

On March 1, 2005, the voting stockholder/members of the Company approved the restructuring of the Company by terminating the Company’s cooperative status and ending the patronage-based rights accruing to the Company’s members. Pursuant to the restructuring, stockholders and subscribers received on April 15, 2005, 500 shares of new common stock for each fully-paid share of Class A common stock, $5,000 par value, 10,000 shares of new common stock for each fully-paid share of Class B common stock, $100,000 par value, one share of new common stock for each $10.00 of paid subscription and one share of new common stock for each $10.00 par value of preferred stock held. Membership interests in the Company represented by patronage-based rights as of August 31, 2004, were converted on April 15, 2005 into (i) shares of new common stock based on an appraised value and relative patronage; and (ii) subscription rights exercisable at a purchase price of $10.00 per share within 60 days after the distribution of new common stock and subscription rights. The Company distributed 4,310,237 shares of new common stock on April 15, 2005 pursuant to the restructuring. The Company commenced the subscription rights offering on April 15, 2005 and the offering continued until June 29, 2005 with 174,372 shares sold and $1,743,720 of equity raised.

In June 2005, the Company formed an employee stock ownership plan (ESOP) and filed a Form S-8 Registration Statement in order to provide employee incentives and an additional capital infusion to the Company. Generally, employees of the Company or any participating affiliates who meet the criteria defined in the ESOP are eligible. Eligible participants were able to elect to make a one-time irrevocable transfer of a portion of their 401(k) Plan to the ESOP. The amount of the transfer was limited to no more than one-third (1/3) of the eligible participant’s 401(k) Plan account balance. The ESOP intends to operate on a plan year which corresponds to the calendar year. For plan years beginning after December 31, 2005, the Company will make matching contributions to the ESOP in an amount equal to 50% of each participant’s eligible elective deferral

F-37

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

contribution to the 401(k) Plan. The Company has accrued $0.4 million of retirement expense related to these matching contributions for the nine-month period ended May 31, 2006. Dividends received with respect to shares of Company Stock allocated to participants’ accounts in the ESOP will be credited to such participants’ accounts annually on the basis of the number of shares of Company Stock allocated to each such participant’s account. The initial ESOP stock sale was consummated as of August 26, 2005, with the ESOP purchasing from the Company 448,692 shares of common stock at a purchase price of $10.00 per share, for an aggregate of $4,486,920. The ESOP purchased 1,400 shares in the quarter ending February 28, 2006 and additionally, purchased 16,057 shares in the quarter ending May 31, 2006, related to the reinvestment of dividends.

In the event a terminated plan participant, whether by death, disability, retirement or other termination, desires to sell his or her shares of Company stock, the Company may be required to purchase the shares from the participant at their appraised value. To the extent that shares of common stock held by the ESOP are not readily tradeable, a sponsor must reflect the maximum cash obligation related to those securities outside of stockholders’ equity as temporary equity. The Company and the ESOP obtain an annual valuation in connection with the administration of the ESOP. The valuation of the Company’s Common Stock for ESOP purposes is subject to applicable federal tax regulations and significantly differs from the valuation performed in connection with the grant of stock options, which does not include a significant liquidity discount (see Note 9). The annual valuation will have the effect of increasing or decreasing the maximum cash obligation related to ESOP shares. This change in the value of ESOP shares is adjusted through stockholders’ equity, and therefore has no impact on net income in the Consolidated Statement of Operations. On March 14, 2006, the Company and the ESOP received from Stern Brothers Valuation Advisors the valuation of the Company’s Common Stock as of December 31, 2005, which valued the Common Stock at $13.04 per share for ESOP purposes.

As of May 31, 2006, the shares held by the ESOP, fair value and maximum cash obligation were as follows:

Shares held by the ESOP		466,149
Fair value per share	$	13.04
Maximum cash obligation	$	6,078,583

8. STOCK AWARD PLAN

On May 2, 2006, FCStone Group, Inc.’s Board of Directors approved the FCStone Group, Inc. 2006 Equity Incentive Plan (the “Plan”). The Plan permits the issuance of up to 750,000 shares of the Company’s common stock to key employees and non-employee directors, pursuant to awards granted under the Plan, such as stock options, restricted stock awards, restricted stock units and performance share awards, as well as other stock-based awards.

9. SUBSEQUENT EVENTS

On June 13, 2006, FCStone Group, Inc. received a valuation, from an independent valuation firm, of the fair value of the Company’s Common Stock for purposes of issuing stock options pursuant to the Company’s 2006 Equity Incentive Plan, valuing the Common Stock at $24.76 per share. In reliance upon such valuation and pursuant to the Plan, on June 13, 2006 the Compensation Committee of the Board of Directors of the Company granted nonqualified stock options to purchase a total of 320,000 shares of Common Stock to executive officers and management employees of the Company and 80,000 shares of Common Stock to the non-employee directors of the Company. The exercise price for the stock options was set by the Compensation Committee at $24.76 per share, based on the third party valuation noted above. The options are 100% vested on the grant date and expire on June 13, 2016. During the fourth quarter of the fiscal year ending August 31, 2006, the Company will apply the intrinsic value-based method in accounting for the stock plan.

F-38

FCSTONE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

On June 28, 2006, FGDI amended its Revolving Credit, Term Loan and Security Agreement (the “Credit Agreement”) with CoBank, ACB (as lender and agent) (“CoBank”). The amendment pertains to certain financial covenants applicable as of May 31, 2006, and allows FGDI to incur indebtedness from FCStone Group, Inc., subject to a subordination agreement. The Credit Agreement’s financial covenants were amended so that FGDI must maintain, at all times, (i) net worth in an amount of not less than $8.6 million through June 28, 2006, $9.8 million from June 29, 2006 through July 31, 2006, and $10.0 million thereafter; (ii) adjusted working capital in an amount not less than $5.3 million through June 28, 2006 and $6.5 million thereafter. As a requirement of the amendment, on June 28, 2006, FGDI entered into a subordinated agreement with FCStone Group, Inc, and borrowed $1.0 million under a subordinated note, which has been eliminated for purposes of consolidated financial statement presentation. The subordinated note bears a variable interest rate equal to the prime rate established by Citibank from time to time.

Effective June 30, 2006, FCStone Group, Inc. entered into an agreement to purchase an equity investment in Green Diesel, LLC for $2.4 million. Green Diesel, LLC is a limited liability company formed to construct, own, and operate a biodiesel plant. In exchange for its capital contribution of $2.4 million, which was funded on July 3, 2006, the Company received a capital interest of 25% and a profit interest of 25% represented by 2.4 million units out of 9.6 million units outstanding.

Effective June 30, 2006, the amount available to borrow from Harris, N.A., was temporarily increased from $15.0 million to $30.0 million for a three month period ended September 30, 2006.

On October 6, 2006, a commodity pool limited partnership, which maintained its commodity account with the company and which was traded by an independent commodity trading advisor, but for which a subsidiary of the company acted as general partner and commodity pool operator, was unable to meet a margin call from assets of the pool. The resulting liquidation of pool positions under continuing adverse market conditions resulted in a deficit account balance of approximately $1.5 million. The company is seeking recourse from the commodity trading advisor, but the amount of possible recovery, if any, is unknown at this time, and the company expects to take a charge against income in the first quarter of the fiscal year ending August 31, 2007.

F-39

SCHEDULE I

FCSTONE GROUP, INC.

CONDENSED STATEMENTS OF FINANCIAL CONDITION

Parent Company Only

August 31, 2004 and 2005

(in thousands)

	2004			2005
ASSETS					(Restated)
Cash and cash equivalents	$	—		$	420
Accounts receivable		17			38
Notes receivable		1,250			1,250
Notes receivable—subsidiary		5,000			1,000
Deferred income taxes		2,710			4,013
Investments in affiliates and others		45,368			54,110
	$	54,345		$	60,831
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Checks written in excess of bank balance	$	124		$	—
Accounts payable		15			25
Accrued expenses:
Accrued pension liability		3,596			5,965
Income taxes payable		379			480
Other		283			439
Notes payable		8,250			4,250
Patronage refunds payable in cash		1,869			—
Total liabilities		14,516			11,159
Redeemable common stock held by ESOP		—			4,487
Stockholders’ equity:
Preferred stock, nonvoting; $1,000 par value:
Series I		12,972			—
Series II		898			—
Common stock:
Class A, voting; $5,000 par value		2,369			—
Class B, voting; $100,000 par value		500			—
Common stock, no par value		—			21,524
Accumulated other comprehensive loss		(3,039	)		(4,555	)
Retained earnings		26,129			32,703
		39,829			49,672
Less maximum cash obligation related to ESOP shares		—			(4,487	)
Total stockholders’ equity		39,829			45,185
	$	54,345		$	60,831

S-1

SCHEDULE I

FCSTONE GROUP, INC.

CONDENSED STATEMENTS OF OPERATIONS

Parent Company Only

Years Ended August 31, 2003, 2004 and 2005

(in thousands)

	2003		2004		2005
Revenues:
Interest	$	—	$	10	$	129
Equity in earnings of affiliates		6,068		9,063		10,142
Total revenues		6,068		9,073		10,271
Costs and expenses:
Interest		2		53		234
Bank charges and miscellaneous		—		—		6
Total costs and expenses		2		53		240
Income before minority interest and income tax expense		6,066		9,020		10,031
Minority interest		561		576		(499	)
Income before income tax expense		5,505		8,444		10,530
Income tax expense		1,200		2,030		3,950
Net income	$	4,305	$	6,414	$	6,580

S-2

SCHEDULE I

FCSTONE GROUP, INC.

CONDENSED STATEMENTS OF CASH FLOWS

Parent Company Only

Years Ended August 31, 2003, 2004 and 2005

(in thousands)

	2003			2004			2005
Cash flows from operating activities:
Net income	$	4,305		$	6,414		$	6,580
Equity in earnings of affiliates		(6,068	)		(9,108	)		(10,142	)
Minority interest, net of distributions		351			380			(733	)
(Decrease) increase in deferred income taxes		(120	)		(236	)		(450	)
Increase in accounts receivable and advances on grain		—			(17	)		(21	)
Increase (decrease) in other assets		32			—			—
(Decrease) increase in accounts payables		—			15			10
Increase (decrease) in income taxes payable		133			(27	)		101
Net cash used in operating activities		(1,367	)		(2,579	)		(4,655	)
Cash flows from investing activities:
Distributions from affiliates		2,512			5,373			2,514
Capital contribution in affiliate		—			(2,100	)		(225	)
Net cash provided by investing activities		2,512			3,273			2,289
Cash flows from financing activities:
Increase in checks written in excess of bank balance		—			124			(124	)
Proceeds from issuance of Common stock		2			1			1,744
Proceeds from issuance of redeemable common stock held by ESOP		—			—			4,487
Payment for redemption of stock		(217	)		(1,437	)		(613	)
Payment of prior year patronage		(937	)		(1,429	)		(1,869	)
Issuance of notes receivable		—			(6,250	)		4,000
Proceeds from notes payable		—			8,250			(4,000	)
Registration costs		—			—			(839	)
Net cash provided by (used in) financing activities		(1,152	)		(741	)		2,786
Net increase (decrease) in cash and cash equivalents—unrestricted		(7	)		(47	)		420
Cash and cash equivalents—unrestricted—at beginning of year		54			47			—
Cash and cash equivalents—unrestricted—at end of year	$	47		$	0		$	420
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	2		$	53		$	224
Income taxes		1,187			2,057			4,215

S-3

SCHEDULE II

FCSTONE GROUP, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

(dollars in thousands)

			Additions
Those reserves which are deducted in the Consolidated Financial Statements from Receivable	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Account		Deduction			Balance at End of Period
Fiscal year ended August 31, 2003
Reserve for doubtful accounts	$	425	$	76	$	—	$	(56	)	$	445
Fiscal year ended August 31, 2004
Reserve for doubtful accounts	$	445	$	716	$	—	$	(191	)	$	970
Fiscal year ended August 31, 2005
Reserve for doubtful accounts	$	970	$	4,077	$	—	$	(4,122	)	$	925

S-4

FCStone Group, Inc.

                     Shares

Common Stock

Prospectus

                    , 2006

Until                         , 2006, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

BMO Capital Markets

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Other Expenses of Issuance and Distribution

The estimated expenses to be borne by us in connection with the offering are as follows:

	Amount to be Paid
Securities and Exchange Commission registration fee	$	9,630
NASD filing fee		9,500
NASDAQ registration expenses		*
Accounting fees and expenses		*
Legal fees and expenses		*
Miscellaneous expenses (including printing expenses)		*
Total	$	*

* To be included by amendment.

Indemnification of Directors and Officers

Section 145 of Delaware General Corporation Law authorizes a court to award or a corporation’s board of directors to grant indemnity to directors and officers in terms sufficiently broad to permit such indemnification under some circumstances for liabilities arising under the Securities Act and to provide for the reimbursement of expenses incurred.

As permitted by Delaware corporation law, our certificate of incorporation provides that we will indemnify our directors, officers, committee members and employees and may indemnify our agents to the fullest extent permitted by law. Our bylaws also permit us to secure insurance on behalf of any officer, director, committee member, employee or other agent for any liability arising out of his or her actions in that capacity, regardless of whether our bylaws would permit indemnification.

As permitted by Delaware corporation law, our certificate of incorporation provides that our directors will not be personally liable to FCStone or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability:

• for any breach of the director’s duty of loyalty to FCStone or its stockholders,

• for any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law,

• for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided by Delaware corporation law, or

• for any transaction from which the director derived an improper personal benefit.

The inclusion of this provision in our certificate of incorporation does not eliminate the directors’ fiduciary duty, and in appropriate circumstances equitable remedies such as injunctive or other forms of non-monetary relief will remain available under Delaware law.

Recent Sales of Unregistered Securities.

Not applicable

Exhibits and Financial Statement Schedules.

The index to exhibits appears immediately following the signature pages to this registration statement.

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Undertakings

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

3) For the purposes of determining liability under the Securities Act of 1933 to any purchaser: If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of West Des Moines, Iowa, on this 12th day of October, 2006.

FCSTONE GROUP, INC.
By:	/S/    PAUL G. ANDERSON
Name:	Paul G. Anderson
Title:	President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below constitutes and appoints Paul G. Anderson and Robert V. Johnson, and each of them, the undersigned’s true and lawful attorneys-in-fact and agents with full power of substitution, for the undersigned and in the undersigned’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/S/    PAUL G. ANDERSON         Paul G. Anderson	President and Chief Executive Officer (principal executive officer)	October 12, 2006
/S/    ROBERT V. JOHNSON         Robert V. Johnson	Executive Vice President and Chief Financial Officer (principal financial and accounting officer)	October 12, 2006
/S/    BRUCE KREHBIEL         Bruce Krehbiel	Chairman of the Board and Director	October 12, 2006
/S/    JACK FRIEDMAN         Jack Friedman	Vice Chairman of the Board and Director	October 12, 2006
/S/    ERIC PARTHEMORE         Eric Parthemore	Secretary and Treasurer of the Board and Director	October 12, 2006

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Signature	Title	Date
/S/    BRENT BUNTE         Brent Bunte	Director	October 12, 2006
/S/    DOUG DERSCHEID         Doug Derscheid	Director	October 12, 2006
/S/    KENNETH HAHN         Kenneth Hahn	Director	October 12, 2006
/S/    DAVID ANDRESEN         David Andresen	Director	October 12, 2006
/S/    TOM LEITING         Tom Leiting	Director	October 12, 2006
/S/    DAVE REINDERS         Dave Reinders	Director	October 12, 2006
/S/    ROLLAND SVOBODA         Rolland Svoboda	Director	October 12, 2006

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EXHIBIT INDEX

Exhibit No.	Description of Document
1.1	Form of Underwriting Agreement(1)
2.1	Plan of Merger(1)
3.1	Form of Certificate of Incorporation of New FCStone, Inc. (to be filed with the Delaware Secretary of State prior to the close of the offering)(2)
3.2	Form of Bylaws of New FCStone, Inc. (to be adopted prior to the close of the offering)(2)
3.3	Certificate of Incorporation of FCStone Group, Inc. (as currently in effect)(3)
3.4	Bylaws of FCStone Group, Inc. (as currently in effect)(3)
4.2	Form of Common Stock Certificate(1)
4.3	FCStone Group, Inc. 2006 Equity Incentive Plan(4)
5.1	Opinion of Stinson Morrison Hecker LLP(1)
10.1	Employment Agreement, dated as of September 1, 2005, between FCStone, LLC, and Paul G. Anderson(5)
10.2	Employment Agreement, dated as of January 5, 2004, between FCStone Group, Inc., and Jeff Soman(3)
10.3	Employment Agreement, dated as of April 18, 1988, between Farmers Commodities Corporation and Robert V. Johnson(3)
10.4	Employment Agreement, dated as of May 9, 2003, between FCStone, LLC, and Steve Gutierrez(3)
10.5	Employment Agreement, dated as of July 8, 1996, among Farmers Commodities Corporation, Farmers Grain Dealers, Incorporated, and Steve Speck(3)
10.6	CEO Deferred Compensation Plan for Paul G. Anderson dated February 22, 2002(3)
10.7	Farmers Commodities Corporation Supplemental Nonqualified Pension Plan(6)
10.8	Short-term Incentive Plan(6)
10.9	Long-term Incentive Plan(6)
10.10	FGDI Incentive Plan(7)
10.11	FCStone Group, Inc. Amended and Restated Mutual Commitment Compensation Plan(6)
10.12	Form of Director Indemnification Agreement(7)
10.13	Master Loan Agreement, dated November 3, 2003, between FCStone Group, Inc., and Deere Credit, Inc.(3)
10.14	Amended and Restated Unsecured Revolving Operating Note, dated May 19, 2006, between FCStone, LLC, and Deere Credit, Inc., due on March 1, 2007(2)
10.15	Change in Terms to Revolving Term Loan Note, dated September 21, 2006, between FCStone Group, Inc., and Deere Credit, Inc., due on October 1, 2006(1)
10.16	Master Loan Agreement, dated April 15, 2002, between FCStone Financial, Inc., and Deere Credit, Inc.(3)
10.17	First Amendment to the Master Loan Agreement, dated November 3, 2003, between FCStone Financial, Inc., and Deere Credit, Inc.(3)

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Exhibit No.	Description of Document
10.18	Limited Corporate Guaranty, dated April 16, 2002, between FCStone Financial, Inc., and Deere Credit, Inc.(3)
10.19	Amended and Restated Revolving Statused Operating Note, dated February 23, 2006, between FCStone Financial, Inc., and Deere Credit, Inc.(8)
10.20	Revolving Subordinated Loan Agreement, dated November 21, 2002, between FCStone, LLC, and Deere Credit, Inc.(3)
10.21	First Amendment to the Revolving Subordinated Loan Agreement, dated November 3, 2003, between FCStone, LLC, and Deere Credit, Inc.(3)
10.22	Second Amendment to the Revolving Subordinated Loan Agreement, dated February 28, 2005, between FCStone, LLC, and Deere Credit, Inc.(2)
10.23	Third Amendment to the Revolving Subordinated Loan Agreement, dated August 31, 2005, between FCStone, LLC, and Deere Credit, Inc.(1)
10.24	Unsecured Revolving Subordinated Note, dated November 21, 2002, between FCStone, LLC, and Deere Credit, Inc., due on December 1, 2005(3)
10.25	First Amendment to the Unsecured Revolving Subordinated Note, dated November 3, 2003, between FCStone, LLC, and Deere Credit, Inc.(3)
10.26	Second Amendment to Unsecured Revolving Subordinated Note, dated as of February 28, 2005, between FCStone, LLC, and Deere Credit, Inc.(1)
10.27	Change in Terms Agreement, dated February 28, 2005, between FCStone, LLC, and Deere Credit, Inc.(9)
10.28	Change in Terms Agreement, dated September 21, 2006, between FCStone, LLC, and Deere Credit, Inc.(1)
10.29	Master Loan Agreement, dated February 15, 2001, between FCStone, LLC, and Deere Credit, Inc.(3)
10.30	Change in Terms to the Master Loan Agreement, dated September 20, 2002, between FCStone, LLC, and Deere Credit, Inc.(1)
10.31	Amended and Restated Unsecured Revolving Operating Note, dated May 19, 2006, between FCStone, LLC, and Deere Credit, Inc., due on March 1, 2007(1)
10.32	Floating Rate Loan/Procedures Letter, dated September 15, 2000, between FCStone, LLC, and Harris Trust Savings Bank for $ 15 million(1)
10.33	First Supplement to Floating Rate Loan/Procedures Letter, dated December 3, 2003, between FCStone, LLC, and Harris Trust Savings Bank(1)
10.34	First Supplement to Floating Rate Loan/Procedures Letter, dated September 21, 2006, between FCStone, LLC, and Harris Trust Savings Bank(1)
10.35	Floating Rate Loan/Procedures Letter, dated September 15, 2000, between FCStone, LLC, and Harris Trust Savings Bank for $ 5 million(1)
10.36	Unsecured Demand Note, dated September 15, 2000, between FCStone, LLC, and Harris Trust Savings Bank(3)
10.37	Guaranty Agreement, dated September 15, 2000, between FCStone, LLC, and Harris Trust Savings Bank(1)
10.38	Guaranty Agreement, dated June 30, 2006, between FCStone, LLC, and Harris, NA(1)

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Exhibit No.	Description of Document
10.39	Letter Agreement for $15 Million Credit Facility, dated March 5, 2003, between FCStone, LLC, and Harris Trust Savings Bank(3)
10.40	Unsecured Demand Note dated September 30, 2006, between FCStone, LLC, and Harris, NA(1)
10.41	Master Loan Agreement dated February 28, 2003 between FCStone Financial, Inc., and CoBank ACB(10)
10.42	Guaranty of Payment, dated February 28, 2003, between FCStone Group, Inc., and CoBank ACB(10)
10.43	Uncommitted Revolving Credit Supplement and Promissory Note to the Master Loan Agreement dated June 8, 2006, between FCStone Financial, Inc., and CoBank ACB(1)
10.44	Revolving Credit, Term Loan and Security Agreement, dated March 28, 2006, by and between FGDI, LLC, and CoBank ACB, as lender and agent(8)
10.45	First Amendment to Revolving Credit, Term Loan and Security Agreement, dated as of May 31, 2006 between FGDI, LLC, and CoBank ACB, as lender and agent(11)
10.46	Master Loan Agreement, dated January 25, 2006, between FCStone Trading, LLC, and CoBank ACB(1)
10.47	Statused Revolving Credit Supplement, dated January 25, 2006, between FCStone Trading, LLC, and CoBank ACB(1)
10.48	Statused Revolving Term Loan Supplement, dated January 25, 2006, between FCStone Trading, LLC, and CoBank ACB(1)
10.49	Cash Subordinated Loan Agreement, dated June 30, 2004, between FCStone, LLC, and Gerald Hirsch(6)
10.50	Amendment to Cash Subordinated Loan Agreement and Promissory Note, dated June 30, 2006, between FCStone, LLC, and Gerald Hirsch(1)
10.51	Cash Subordinated Loan Agreement, dated December 12, 2003 between FCStone, LLC, and William Shepard(6)
10.52	Amendment to Cash Subordinated Loan Agreement and Promissory Note, dated December 14, 2005 between FCStone, LLC, and William Shepard(1)
10.53	Trust Indenture for Industrial Revenue Bonds, dated December 1, 2003(6)
10.54	Lease Agreement, dated December 1, 2002, between the Industrial Development Board of the City of Mobile, Alabama and FGDI, LLC(6)
10.55	Letter Agreement, dated March 31, 2004, between FCStone Merchant Services, LLC, and Fortis Capital Corp. for $20,000,000 credit facility(7)
10.56	Promissory Note ($20,000,000), dated May 10, 2004, between FCStone Merchant Services, LLC, and Fortis Capital Corp.(7)
10.57	Continuing Security Agreement between FCStone Merchant Services, LLC, and Fortis Capital Corp.(7)
10.58	Letter Agreement, dated February 17, 2004, between FCStone Merchant Services, LLC, and RZB Finance, LLC, for $5,000,000 credit facility(7)
10.59	General Security Agreement and Supplement, dated February 17, 2004, between FCStone Merchant Services, LLC, and RZB Finance, LLC(7)

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Exhibit No.	Description of Document
10.60	Amended and Restated Promissory Note ($8,000,000), dated January 30, 2006, between FCStone Merchant Services, LLC, and RZB Finance, LLC(2)
10.61	Demand Note, dated November 23, 2004, between FCStone Merchant Services, LLC, and UFJ Bank, Limited(1)
21.1	Subsidiaries of the Registrant(3)
23.1	Consent of KPMG LLP(2)
23.2	Consent of Stinson Morrison Hecker LLP (included in its opinion filed as Exhibit 5.1 hereto)
24.1	Power of attorney (included in the signature page to this Registration Statement)

(1) To be filed by amendment.

(2) Filed herewith.

(3) Previously filed as an exhibit to the Registration Statement on Form S-4 filed by FCStone Group, Inc., on August 18, 2004.

(4) Previously filed as an exhibit to the Registration Statement on Form S-8, filed by FCStone Group, Inc., on June 12, 2006.

(5) Previously filed as an exhibit to the Current Report on Form 8-K filed by FCStone Group, Inc., on December 14, 2005.

(6) Previously filed as an exhibit to Amendment No. 2 to the Registration Statement on Form S-4 filed by FCStone Group, Inc., on December 9, 2004.

(7) Previously filed as an exhibit to Amendment No. 3 to the Registration Statement on Form S-4 filed by FCStone Group, Inc., on December 30, 2004.

(8) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter ended February 28, 2006, filed by FCStone Group, Inc., on April 19, 2006.

(9) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter ended February 28, 2005 filed by FCStone Group, Inc., on April 14, 2005.

(10) Previously filed as an exhibit to Amendment No. 1 to the Registration Statement on Form S-4 filed by FCStone Group, Inc., on October 6, 2004.

(11) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter ended May 31, 2006, filed by FCStone Group, Inc., on July 17, 2006

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EX-3.1

Exhibit 3.1

CERTIFICATE OF INCORPORATION

OF

NEW FCSTONE, INC.

ARTICLE I

NAME

The name of the Corporation is New FCStone, Inc.

ARTICLE II

INCORPORATOR AND REGISTERED AGENT

Section 1. The name of the incorporator is Craig L. Evans, and his mailing address is 1201 Walnut Street, Suite 2900, Kansas City, Missouri 64105.

Section 2. The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The name of the registered agent of the Corporation at such address is The Corporation Trust Company.

ARTICLE III

PURPOSES

The nature of the business or purposes to be conducted or promoted by the Corporation are to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law (as amended from time to time, the “DGCL”). In addition to the powers and privileges conferred upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers and privileges which are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation.

ARTICLE IV

AUTHORIZED SHARES

The total number of shares of capital stock which the Corporation shall have the authority to issue is 60,000,000 shares, of which:

(a) 40,000,000 shares shall be shares of Common Stock, par value $0.0001 per share (the “Common Stock”), including 10,000,000 shares of Common Stock that are designated Series 1 Common Stock, par value $0.0001 per share (“Series 1 Common Stock”), 10,000,000 shares that are designated Series 2 Common Stock, par value (“Series 2 Common Stock”), and 10,000,000 shares that are designated Series 3 Common Stock, par value $0.0001 per share (“Series 3 Common Stock”); and

(b) 20,000,000 shares shall be shares of Preferred Stock, par value $0.0001 per share (“Preferred Stock”).

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The Series 1 Common Stock, the Series 2 Common Stock and the Series 3 Common Stock collectively shall be referred to as “Restricted Common Stock” and all other shares of Common Stock shall be referred to as “Unrestricted Common Stock.” The Common Stock, including the Series 1 Common Stock, the Series 2 Common Stock and the Series 3 Common Stock, and the Preferred Stock collectively are referred to as the “Capital Stock.”

ARTICLE V

COMMON STOCK

Section 1. Except as otherwise specifically provided in this Certificate of Incorporation, the powers, preferences and rights of the shares of Common Stock are in all respects identical.

Section 2. Subject to the authority of the Board of Directors to reduce the duration of or to remove the transfer restrictions associated with the shares of Restricted Common Stock and convert such shares of Restricted Common Stock into the same number of shares of Unrestricted Common Stock pursuant to Section 3 of this Article V, no share of Restricted Common Stock may be sold, transferred or otherwise disposed of except (A) to any transferee approved in advance by the Board of Directors, (B) in the case of shares issued to any employee stock ownership plan adopted by the Board of Directors (including shares owned by any trust created pursuant to any such employee stock ownership plan), in accordance with the terms of such plan, (C) by operation of law, or (D) in a Permitted Transfer (as such term is defined in Section 4(c) of this Article V); provided, however, the transfer restrictions set forth in this Section 2 of Article V shall expire as follows:

(a) On the date (the “Series 1 Conversion Date”) that is one hundred eighty (180) days following the date that a Qualified Initial Public Offering is consummated, all transfer restrictions applicable to the Series 1 Common Stock and set forth in this Section 2 of Article V shall expire and all shares of Series 1 Common Stock automatically shall convert (without any action by any holder thereof) into the same number of shares of Unrestricted Common Stock;

(b) On the date (the “Series 2 Conversion Date”) that is three hundred sixty (360) days following the date that a Qualified Initial Public Offering is consummated, all transfer restrictions applicable to the Series 2 Common Stock and set forth in this Section 2 of Article V shall expire and all shares of Series 2 Common Stock automatically shall convert (without any action by any holder thereof) into the same number of shares of Unrestricted Common Stock; and

(c) On the date (the “Series 3 Conversion Date”) that is five hundred forty (540) days following the date that a Qualified Initial Public Offering is consummated, all transfer restrictions applicable to the Series 3 Common Stock and set forth in this Section 2 of Article V shall expire and all shares of Series 3 Common Stock automatically shall convert (without any action by any holder thereof) into the same number of shares of Unrestricted Common Stock.

Section 3. The Board of Directors shall have the authority, in its sole and absolute discretion, to reduce the duration of, or to remove, in whole or in part, the transfer restrictions set

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forth in Section 2 of this Article V and, in connection therewith, cause the conversion of all or any portion of the shares of Restricted Common Stock into the same number of shares of Unrestricted Common Stock. Without limiting the foregoing in any manner, the Board of Directors shall have the authority, in its sole and absolute discretion, to approve a transfer of all or any portion of the outstanding Restricted Common Stock as a Conversion Transfer (as such term is defined in Section 4(a) of this Article V), or a Non-Conversion Transfer (as such term is defined in Section 4(b) of this Article V). The Board of Directors shall have the authority to cause any certificate or statement of share ownership representing shares of Restricted Common Stock to bear a conspicuous legend concerning the transfer restrictions set forth in Section 2 of this Article V.

Section 4. For purposes of this Article V, the following terms shall have the following meanings:

(a) The term “Conversion Transfer” shall mean any of the following transfers (each of which will result in the conversion of the applicable shares of Restricted Common Stock into the same number of shares of Unrestricted Common Stock upon completion of such transfer):

(i) transfers to the Corporation;

(ii) transfers in a Qualified Initial Public Offering; and

(iii) transfers approved as a Conversion Transfer by the Board of Directors pursuant to Section 3 of this Article V.

(b) The term “Non-Conversion Transfer” shall mean any of the following transfers (each of which will result in the applicable shares of Restricted Common Stock remaining Restricted Common Stock upon completion of such transfer):

(i) transfers to any corporation, limited liability company, partnership, trust, unincorporated organization or association, syndicate, or other entity or any natural person, in each case, who is a holder of Capital Stock of the Corporation immediately prior to such transfer;

(ii) transfers to (1) the transferor’s spouse or child, (2) a trust established for the benefit of the transferor or the transferor’s spouse or child, (3) the beneficial owner of an individual retirement account, provided that the transferor is such individual retirement account, (4) the estate of a deceased holder of Restricted Common Stock, provided that such transfer was pursuant to the deceased holder’s will or the applicable laws of descent and distribution, or (5) the beneficiary of an estate referred to in clause (4) above, provided that the transferor is such estate and such beneficiary is the spouse or child of the deceased holder or a trust for the sole benefit of such spouse or child;

(iii) bona fide pledges to a commercial bank, a savings and loan institution or any other lending or financial institution; and

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(iv) transfers approved as Non-Conversion Transfers by the Board of Directors pursuant to Section 3 of this Article V.

(c) The term “Permitted Transfer” shall mean a Conversion Transfer or a Non-Conversion Transfer.

(d) The term “Qualified Initial Public Offering” shall mean an initial public offering of Common Stock that has been underwritten by one or more nationally recognized underwriting firms, following which shares of Common Stock are listed on a national securities exchange or quoted on the NASDAQ stock market, or any successor thereto or any comparable system. The date and time upon which a Qualified Initial Public Offering has occurred shall be determined by the Board of Directors in its sole and absolute discretion, and such determination shall be final and binding upon the stockholders of the Corporation.

(e) The term “Scheduled Conversion Date” means each or all of the Series 1 Conversion Date, the Series 2 Conversion Date and the Series 3 Conversion Date, as the context may require.

Section 5. All shares of Restricted Common Stock that convert into Unrestricted Common Stock pursuant to Section 2 of this Article V shall be retired and shall not be reissued as shares of any series of Restricted Common Stock, but shall instead resume the status of and become authorized and unissued shares of Unrestricted Common Stock.

Section 6. Any purported sale, transfer or other disposition of Common Stock not in accordance with Section 2 of this Article V shall be void and shall not be recorded on the books of, or otherwise recognized by, the Corporation. In connection with any sale, transfer or other disposition subject to Section 2 of this Article V, the transferor shall notify the Corporation and its transfer agent, as applicable, as to which provision of Section 2 of this Article V such sale, transfer or disposition is being effected in compliance with and shall furnish such documents or other evidence as the Corporation or its transfer agent may request to verify such compliance.

Section 7.

(a) In the event that the Corporation consummates a Qualified Initial Public Offering, the Board of Directors shall, to the extent assets and funds are legally available therefor, cause the Corporation to redeem, on or prior to the date that is ninety (90) days after the date the Qualified Initial Public Offering is consummated, as determined by the Board of Directors, shares of Redeemable Common Stock (as defined below) in an amount not exceeding the lesser of (i) fifty percent (50%) of the aggregate number of shares of Common Stock that are issued and sold by the Corporation in the Qualified Initial Public Offering (excluding any shares sold pursuant to the underwriters’ option to purchase additional shares or “over-allotment option”), and (ii) twenty percent (20%) of the aggregate number of shares of Redeemable Common Stock that are issued and outstanding immediately prior to the Qualified Initial Public Offering (excluding any shares of Common Stock that would then be considered Redeemable Common Stock but subsequently are sold by the holders thereof in the Qualified Initial Public Offering), with

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the actual number of shares redeemed being determined by the Board of Directors in its sole discretion, and such shares of Redeemable Common Stock shall be redeemable by the Corporation on the terms set forth in this Section 7.

(b) In effecting any redemption pursuant to this Section 7, the Corporation shall redeem shares of Redeemable Common Stock from all holders thereof on a pro rata basis in proportion to the number of shares of Redeemable Common Stock held by each such holder immediately prior to the Qualified Initial Public Offering (excluding any shares of Common Stock that would then be considered Redeemable Common Stock but subsequently are sold by the holder thereof in the Qualified Initial Public Offering); provided, however, the Corporation may round off to a full share the number of shares to be redeemed from any holder so that fractional interests of less than one-half share will be rounded down and fractional interests of one-half share or more will be rounded up and, therefore, the aggregate number of shares of Redeemable Common Stock redeemed by the Corporation would be adjusted accordingly.

(c) The redemption price per share payable to holders of Redeemable Common Stock shall be payable in cash in an amount equal to the quotient of (i) the aggregate cash proceeds that the Corporation receives in the Qualified Initial Public Offering (excluding any shares sold pursuant to the underwriters’ option to purchase additional shares or “over-allotment option”), net of underwriting discounts and commissions and other offering-related expenses as determined by the Board of Directors in its sole discretion (which expenses may include expenses and estimated expenses not yet paid), divided by (ii) the aggregate number of shares of Common Stock that are issued and sold by the Corporation in the Qualified Initial Public Offering (excluding any shares sold pursuant to the underwriters’ option to purchase additional shares or “over-allotment option”). The Corporation shall send written notice of redemption to the holders of the shares of Redeemable Common Stock being redeemed and deposit, set aside or pay the redemption price therefor. The Board of Directors may establish such procedures as it may in its sole and absolute discretion determine to be necessary or desirable for the orderly redemption of Redeemable Common Stock pursuant to this Section 7, which procedures shall be binding upon the holders of Redeemable Common Stock.

(d) For purposes of this Section 7, the term “Redeemable Common Stock” shall mean the shares of Common Stock that are issued and outstanding immediately prior to the Qualified Initial Public Offering other than those that are sold by the holders thereof in the Qualified Initial Public Offering. Shares of Common Stock that are issued and sold by the Corporation in the Qualified Initial Public Offering or at any time after the date the Qualified Initial Public Offering is consummated would not be issued and outstanding immediately prior to the Qualified Initial Public Offering and therefore would not constitute “Redeemable Common Stock”.

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ARTICLE VI

PREFERRED STOCK

Section 1. Pursuant to Section 151 of the DGCL and in the manner provided therein, but subject to the limitations prescribed by law and the provisions of this Certificate of Incorporation, the Board of Directors is hereby authorized to provide by resolution for the issuance of Preferred Stock in one or more series, to establish the number of shares to be included in each such series and to fix and state the designations, preferences and relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, applicable to the shares of each such series. The Board of Directors shall file a certificate of designation pursuant to the DGCL for the shares of each such series before issuing such shares hereunder which certificate of designation shall designate the terms of the series of Preferred Stock to be issued. The shares of each series of Preferred Stock authorized by the Board of Directors hereunder may vary from the shares of any other series as to rights, privileges, qualifications, limitations or restrictions applicable thereto.

ARTICLE VII

VOTING AND QUORUM

Section 1. Common Stock shall entitle the holders thereof to vote on all matters coming before the stockholders for decision. Except as otherwise may be required by law, each outstanding share of Common Stock shall entitle the holder thereof to one (1) vote on each matter properly submitted to the stockholders of the Corporation for their vote.

Section 2. Except as otherwise may be required by law, each outstanding share of Preferred Stock shall entitle the holder thereof to only such voting rights as may be specified for such share in the certificate of designation relating to such share filed pursuant to the DGCL.

Section 3. The number of shares of Common Stock required to be represented, in person or by proxy, at any meeting of the stockholders of the Corporation in order to constitute a quorum for the transaction of business at such meeting shall be the minimum number of shares required by law to be so represented or, if greater, such number of shares as may be required by the Bylaws of this Corporation to be represented, in person or by proxy, at any such meeting. The number of shares of Preferred Stock required to be represented, in person or by proxy, at any meeting of the stockholders of the Corporation in order to constitute a quorum for the transaction of business at such meeting shall be as provided in the certificate of designation relating to such shares filed pursuant to the DGCL.

ARTICLE VIII

BOARD OF DIRECTORS

Section 1. The property, business and affairs of the Corporation shall be managed and controlled by a governing body, which shall be known as the “Board of Directors.”

Section 2. The number of directors of the Corporation shall be fixed by, or in the manner provided in, the Bylaws of this Corporation.

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Section 3. The members of the Board of Directors, other than those who may be elected by the holders of the Preferred Stock or series thereof, shall be divided into three classes (to be designated as Class I, Class II and Class III), as nearly equal in number as the then total number of directors constituting the whole Board of Directors permits, with the terms of office of one class expiring each year. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the terms of the director or directors elected by such holders shall expire at the next succeeding annual meeting of stockholders. Subject to the foregoing, at each annual meeting of stockholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting and until their respective successors shall be duly elected and qualified or until their respective earlier resignation or removal. As used in this Certificate of Incorporation, the term “whole Board of Directors” is hereby exclusively defined to mean the total number of directors which the Corporation would have if there were no vacancies on the Board of Directors.

Section 4. Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the Bylaws of the Corporation), any director or the entire Board of Directors may be removed at any time, but only for cause and only by the affirmative vote of the holders of two thirds (2/3) or more of the Total Voting Power (as defined below) of the then outstanding shares of Voting Stock (as defined below), considered for this purpose as one class. For the purposes of this Section 4 of Article VIII: (a) the term “Total Voting Power” shall mean the aggregate of all votes of all outstanding shares of Voting Stock; (b) the term “Voting Stock” shall mean the shares of all classes of Capital Stock of the Corporation entitled to vote on removal of any director or the entire Board of Directors (except that if the next succeeding sentence is operative, then the outstanding shares of Preferred Stock shall not be considered “Voting Stock” for purposes of this Section 4 of Article VIII); and (c) the term “for cause” shall mean commission of a felony, or a finding by a court of competent jurisdiction of liability for negligence, or misconduct, in the performance of the director’s duty to the Corporation in a matter of substantial importance to the Corporation, where such adjudication is no longer subject to direct appeal. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of this Section 4 of Article VIII, shall not apply with respect to the director or directors elected by such holders of Preferred Stock.

Section 5. There shall be no qualifications for election of persons as directors of the Corporation, except that no person shall qualify to serve as a director or shall be eligible to stand for election as a director if such person has been convicted of a felony by a court of competent jurisdiction where such conviction is no longer subject to direct appeal. Any director who, at any time during his or her term of office, fails to continue to satisfy the qualifications under which he or she was last elected to the Board of Directors, or who ceases to qualify to serve on the Board of Directors under this Section 5 of Article VIII, shall thereupon cease to be qualified as a director and the term of office of such person shall automatically end. Notwithstanding the foregoing, no action of such unqualified director, the Board of Directors or any committee

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thereof shall be rendered invalid or otherwise affected solely because such director becomes or at the time of such action was not qualified.

Section 6. Elections of Directors need not be by ballot unless the Bylaws of the Corporation shall so provide.

ARTICLE IX

CERTAIN BUSINESS COMBINATIONS

Section 1. In addition to any affirmative vote required by law, by this Certificate of Incorporation, or by the provisions of any series of Preferred Stock that may at the time be outstanding, and except as otherwise expressly provided for in Section 2 of this Article IX, any Business Combination (as hereinafter defined) shall require (i) the affirmative vote of not less than eighty percent (80%) of the total number of votes eligible to be cast by the holders of all outstanding shares of Common Stock, voting together as a single class (it being understood that for purposes of this Article IX each share of the Common Stock shall have the number of votes granted to it pursuant to Article VII hereof or in any resolution or resolutions of the Board of Directors for issuance of shares of Preferred Stock) and (ii) the affirmative vote of at least fifty percent (50%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the Common Stock not beneficially owned by an Interested Shareholder or any Affiliate or Associate thereof (each as hereinafter defined), voting together as a single class. Such affirmative votes shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise.

Section 2. The provisions of Section 1 of this Article IX shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law or any other provision of this Certificate of Incorporation, if the Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined) then in office.

Section 3. For purposes of this Article IX, the following terms shall have the following meanings:

(a) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the date the Corporation’s Certificate of Incorporation was issued by the Secretary of State of the State of Delaware, whether or not the Corporation was then subject to such rule.

(b) A Person (as hereinafter defined) shall be deemed the “beneficial owner” or to have “beneficial ownership,” of any shares of Common Stock that:

(i) such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or

(ii) such Person or any or its Affiliates or Associates, directly or indirectly, has (A) the right to acquire (whether such right is exercisable

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immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (but a Person shall not be deemed to be the beneficial owner of any Common Stock solely by reason of an agreement, arrangement or understanding with the Corporation to effect a Business Combination) or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote, or to direct the vote of, pursuant to any agreement, arrangement or understanding; or

(iii) is beneficially owned, directly or indirectly, by any other Person with which such first mentioned Person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Common Stock; provided, however, that no director or officer of the Corporation (nor any Affiliate or Associate of any such director or officer) (y) shall, solely by reason of any or all of such directors or officers acting in their capacities as such, be deemed, for any purposes hereof, to beneficially own any Common Stock of the Corporation beneficially owned by any other such director or officer (or any Affiliate or Associate thereof) or (z) shall be deemed to beneficially own any Common Stock of the Corporation owned by any pension, profit-sharing, stock bonus or other compensation plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the Corporation is a member for the benefit of employees of the Corporation and/or any subsidiary, or any trust or custodial arrangement established in connection with any such plan, not specifically allocated to such Person’s personal account.

(c) The term “Business Combination” shall mean any transaction that is referred to in any one or more of the following paragraphs (i) through (vi):

(i) any merger, consolidation or share exchange of the Corporation with (A) any Interested Shareholder, or (B) any other entity (whether or not such other entity is itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of any Interested Shareholder; or

(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder of any assets of the Corporation having an aggregate Fair Market Value equal to five percent (5%) or more of the total assets of the Corporation as of the end of its most recent fiscal year ending prior to the time the determination is being made; or

(iii) the issuance or transfer by the Corporation (in one transaction or a series of transactions) of any securities of the Corporation to any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder other than (A) on a pro rata basis to all holders of Common Stock, (B) in connection with the exercise or conversion of securities issued pro rata that are exercisable for, or convertible into, securities of the Corporation or (C) the issuance or transfer of such securities having an aggregate Fair

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Market Value equal to less than one percent (1%) of the aggregate Fair Market Value of all of the outstanding Capital Stock; or

(iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder; or

(v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of equity or convertible securities of the Corporation or any subsidiary that is directly or indirectly owned by any Interested Shareholder or any Affiliate or Associate of any Interested Shareholder, except as a result of immaterial changes due to fractional share adjustments, which changes do not exceed, in the aggregate, 1% of the issued and outstanding shares of such class or series of equity or convertible securities; or

(v) the acquisition by the Corporation of any securities of an Interested Shareholder or its Affiliates or Associates.

(d) “Determination Date” shall mean the date on which the Interested Shareholder became an Interested Shareholder.

(e) “Disinterested Director” shall mean any member of the Board of Directors of the Corporation who is not an Affiliate or Associate of, or otherwise affiliated with, the Interested Shareholder and who either was a member of the Board of Directors prior to the Determination Date, or was recommended for election by a majority of the Disinterested Directors in office at the time such director was nominated for election.

(f) “Fair Market Value” shall mean (i) in the case of stock, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the NASDAQ stock market or any system then in use, or if no such quotation is available, the fair market value on the date in question of a share of such stock as determined in good faith by a majority of the Disinterested Directors then in office, in each case with respect to any class of stock, appropriately adjusted for any dividend or distribution in shares of such stock or any stock split or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Disinterested Directors then in office.

(g) “Interested Shareholder” shall mean any Person (other than the Corporation, or any pension, profit-sharing, stock bonus or other compensation plan maintained by the Corporation or by a member of a controlled group of corporations or trades or businesses of which the Corporation is a member for the benefit of employees of the Corporation, or any trust or custodial arrangement established in connection with any such plan) who or which:

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(i) is the beneficial owner of five percent (5%) or more of the Common Stock; or

(ii) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of five percent (5%) or more of the then outstanding Common Stock; or

(iii) is an assignee of or has otherwise succeeded to any shares of Common Stock that were at any time within the two-year period immediately prior to the date in question beneficially owned by any other Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering with the meaning of the Securities Act of 1933, as amended, and not executed on any exchange or in the over the counter market through a registered broker or dealer.

In determining whether a Person is an Interested Shareholder pursuant to this Section 3(g) of Article IX, the number of shares of Common Stock deemed to be outstanding shall include shares deemed owned through application of Section 3(b) of this Article IX but shall not include any other shares of Common Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

(h) “Person” shall mean any corporation, limited liability company, partnership, trust, unincorporated organization or association, syndicate, any other entity or a natural person, together with any Affiliate or Associate of such person or any other person acting in concert with such person.

Section 4. When it appears that a particular Person may be an Interested Shareholder and that the provisions of this Article IX need to be applied or interpreted, then a majority of the directors of the Corporation who qualify as Disinterested Directors shall have the power and duty to interpret all of the terms and provisions of this Article IX, and to determine on the basis of information known to them after reasonable inquiry of all facts necessary to ascertain compliance with this Article IX, including, without limitation, (a) whether a Person is an Interested Shareholder, (b) the number of shares of Common Stock beneficially owned by any Person, (c) whether a Person is an Affiliate or Associate of another, (d) the Fair Market Value of (i) the assets that are the subject of any Business Combination, (ii) the securities to be issued or transferred by the Corporation in any Business Combination, (iii) the consideration other than cash to be received by holders of shares of any class or series of Common stock or Capital Stock other than Common Stock in any Business Combination, (iv) the outstanding Capital Stock, or (v) any other item the Fair Market Value of which requires determination pursuant to this Article IX, and (e) whether all of the applicable conditions set forth in Section 2 of this Article IX have been met with respect to any Business Combination. Any constructions, applications, or determinations made by the Board of Directors or the Disinterested Directors pursuant to this Article IX, in good faith and on the basis of such information and assistance as was then reasonably available for such purpose, shall be conclusive and binding upon the Corporation and its stockholders, and neither the Corporation nor any of its stockholders shall have the right to challenge any such construction, application or determination.

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Section 5. Nothing contained in this Article IX shall be construed to relieve any Interested Shareholder from any fiduciary obligations imposed by law.

Section 6. Notwithstanding any other provisions of this Certificate of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by law, this Certificate of Incorporation or the Bylaws of the Corporation), in addition to any affirmative vote required by applicable law and any voting rights granted to or held by holders of Preferred Stock, any amendment, alteration, repeal or rescission of any provision of this Article IX must also be approved by either (i) a majority of the Disinterested Directors, or (ii) the affirmative vote of not less than eighty percent (80%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the Common Stock, voting together as a single class, together with the affirmative vote of not less than fifty percent (50%) of the total number of votes eligible to be cast by the holders of all outstanding shares of the Common Stock not beneficially owned by any Interested Shareholder or Affiliate or Associate thereof, voting together as a single class.

ARTICLE X

AMENDMENT OF CERTIFICATE OF INCORPORATION

Section 1. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation; provided, however, that no such amendment, alteration, change or repeal may be made except in accordance with Section 2 of this Article X.

Section 2. None of the provisions of Articles V, VIII, XI or this Article X (excluding the second sentence of this Section 2 of Article X) may be amended, altered, changed or repealed except upon the affirmative vote at any annual or special meeting of the stockholders, of the holders of at least two thirds (2/3) or more of the Total Voting Power (as defined below) of the then outstanding shares of Voting Stock (as defined below), considered for this purpose as one class, nor shall new provisions to this Certificate of Incorporation be adopted or existing provisions to this Certificate of Incorporation be amended, altered or repealed which in either instance are in conflict or inconsistent with Articles V, VIII, XI or this Article X except upon such two thirds (2/3) or more stockholder vote. None of the provisions of Articles XIV or the second sentence of this Section 2 of Article X may be amended, altered, changed or repealed except upon the affirmative vote at any annual or special meeting of the stockholders, of the holders of at least three-fourths (3/4) or more of the Total Voting Power of the then outstanding shares of Voting Stock, considered for this purpose as one class, nor shall new provisions to this Certificate of Incorporation be adopted or existing provisions to this Certificate of Incorporation be amended, altered or repealed which in either instance are in conflict or inconsistent with Articles XIV or the second sentence of this Section 2 of Article X except upon such three-fourths (3/4) or more stockholder vote. For purposes of this Article X: (a) the term “Total Voting Power” shall mean the aggregate of all votes of all outstanding shares of Voting Stock; and (b) the term “Voting Stock” shall mean the shares of all classes of Capital Stock of the Corporation entitled to vote on amending, altering, changing or repealing this Certificate of Incorporation or any provision hereof. Any inconsistency developing between the provisions of a Bylaw of the

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Corporation and any provisions of this Certificate of Incorporation shall be controlled by this Certificate of Incorporation.

ARTICLE XI

ADOPTION AND AMENDMENT OF BYLAWS

Section 1. The Bylaws of the Corporation shall be adopted in any manner provided by law.

Section 2. In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, adopt, alter, amend or repeal the Bylaws of the Corporation by the vote of not less than a majority of the whole Board of Directors; provided, however, that the power of the Board of Directors to alter, amend or repeal the Bylaws, or to adopt new Bylaws, (a) may be denied as to any Bylaw or portion thereof by the stockholders if at the time of enactment the stockholders shall so expressly provide and (b) such power of the Board of Directors shall not divest the stockholders of the power, nor limit their power to amend or repeal the Bylaws, or to adopt new Bylaws.

Section 3. Notwithstanding any other provision in this Certificate of Incorporation or the Bylaws of the Corporation, the stockholders of the Corporation shall also have the power, to the extent such power is at the time in question conferred on them by applicable law, to make, adopt, alter, amend or repeal the Bylaws of the Corporation.

ARTICLE XII

PREEMPTIVE RIGHTS

Except as otherwise may be provided by the Board of Directors with respect to the holders of any one or more series of Preferred Stock in the certificate of designation relating to such series filed pursuant to the DGCL, no holder of any shares of Capital Stock of the Corporation of any class shall be entitled as such, as a matter of right, to subscribe for or purchase any shares of Capital Stock of the Corporation of any class, whether now or hereafter authorized or whether issued for cash, property or services or as a dividend or otherwise, or to subscribe for or purchase any obligations, bonds, notes, debentures, other securities or stock convertible into shares of Capital Stock of the Corporation of any class or carrying or evidencing any right to purchase shares of Capital Stock of any class.

ARTICLE XIII

LIMITATION OF LIABILITY

Section 1. The Corporation may agree to the terms and conditions upon which any director, officer, employee or agent accepts his or her office or position and in its Bylaws, by contract or in any other manner may agree to indemnify and protect any director, officer, employee or agent of the Corporation, or any person who serves at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the fullest extent permitted by the laws (including, without limitation, the statutes, case law and principles of equity) of the State of Delaware.

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Section 2. Without limiting the generality of the foregoing provisions of this Article XIII, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.

Section 3. Any repeal or modification of the foregoing Sections of this Article XIII by the Board of Directors or stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

Section 4. For purposes of this Article XIII, the term “director” shall, to the fullest extent permitted by the DGCL, include any person who, pursuant to this Certificate of Incorporation, is authorized to exercise or perform any of the powers or duties otherwise conferred upon a board of directors by the DGCL.

ARTICLE XIV

DISSOLUTION

Any resolution to dissolve the Corporation shall require for its adoption the affirmative vote of the holders of at least three-fourths (3/4) of the outstanding shares of all classes of Capital Stock of the Corporation entitled to vote thereon.

ARTICLE XV

STOCKHOLDER MEETINGS

No action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied.

ARTICLE XVI

CERTAIN PROPOSED COMPROMISES

Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths (3/4) in

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value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

IN WITNESS WHEREOF, the undersigned, for the purpose of forming a corporation under the DGCL, does hereby execute this Certificate of Incorporation, and does hereby declare and certify that this is the act and deed of the undersigned and the facts herein stated are true, and accordingly the undersigned has executed this Certificate of Incorporation as of October 9, 2006.

/s/ Craig L. Evans

Craig L. Evans, Incorporator

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EX-3.2

Exhibit 3.2

BYLAWS

OF

NEW FCSTONE, INC.

ARTICLE I

OFFICES AND RECORDS

1.1 Corporate Offices. The principal office of the Corporation shall be located at any place within or without the State of Delaware as designated in the Corporation’s most current Annual Report filed with the Delaware Secretary of State. The Corporation may have such other corporate offices and places of business anywhere within or without the State of Delaware as the Board of Directors may from time to time designate or the business of the Corporation may require.

1.2 Registered Office and Registered Agent. The location of the registered office and the name of the registered agent of the Corporation in the State of Delaware shall be as stated in the Certificate of Incorporation or as determined from time to time by the Board of Directors and on file in the appropriate public offices of the State of Delaware pursuant to applicable provisions of law.

1.3 Books, Accounts and Records, and Inspection Rights. The books, accounts and records of the Corporation, except as otherwise required by the laws of the State of Delaware, may be kept outside of the State of Delaware, at such place or places as the Board of Directors may from time to time designate. Subject to the requirements of applicable law, the Board of Directors shall determine whether, to what extent and the conditions upon which the Corporation’s stock ledger, the list of its stockholders, and its other books, accounts and records, or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect the stock ledger, the stockholder list, or any book, account or record of the Corporation, except as conferred by law or by resolution of the stockholders or Directors.

ARTICLE II

STOCKHOLDERS

2.1 Place of Meetings. All meetings of the stockholders shall be held at the offices of the Corporation in the City of West Des Moines, State of Iowa, or at such other place either within or without the State of Delaware as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.

2.2 Annual Meetings. An annual meeting of the stockholders of the Corporation shall be held on the second Tuesday in January of each year, if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 a.m., or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. At such meeting, the stockholders shall elect directors and shall transact such other business as may properly come before the meeting as provided in Bylaw 2.12. Each

director shall be elected to serve until the expiration of his or her term of office as provided for in Section 3 of Article VI of the Corporation’s Certificate of Incorporation and his or her successor is duly elected and qualified, or until his or her earlier resignation or removal.

2.3 Special Meetings. Special meetings of the stockholders may be held for any purpose or purposes specified in the Corporation’s notice of meeting, unless otherwise prescribed by statute or by the Certificate of Incorporation. Only such business shall be conducted at a special meeting as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting and therefore no stockholder may submit a proposal for consideration at a special meeting of stockholders, except as may be permitted by the last sentence of Bylaw 2.12(f); provided, however, that if the special meeting is called for the purpose of electing directors, a stockholder may nominate a candidate or candidates, subject to compliance with the provisions of Bylaw 2.12(c). Except as otherwise required by law and subject to the rights, if any, of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, special meetings of the stockholders of the Corporation may be called only by the Chairman of the Board of Directors, by the President of the Corporation or by the Board of Directors pursuant to a resolution approved by a majority of the whole Board of Directors.

The “call” and the “notice” of any such meeting shall be deemed to be synonymous.

2.4 Notice. Written notice of each meeting of the stockholders, whether annual or special, stating the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes thereof, shall be given to each stockholder of record of the Corporation entitled to vote at such meeting, either personally or by mail, not less than ten (10) days nor more than sixty (60) days prior to the meeting. If mailed, such notice shall be deemed to be delivered when it is deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholders’ address as it appears on the records of the Corporation.

Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. For purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process. A stockholder’s consent to the receipt of notice by electronic transmission shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (b) such inability becomes known to the secretary or an assistant secretary of the Corporation or to the transfer agent or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

Notice given by electronic transmission shall be deemed given: (1) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive

notice; (2) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (3) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the stockholder.

2.5 Waiver of Notice. Whenever any notice is required to be given to any stockholder under any law, the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to such notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance by a stockholder at a meeting shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these Bylaws.

2.6 Meeting Procedures. The order of business and all other matters of procedure at every meeting of the stockholders may be determined by the presiding officer. The Board of Directors shall appoint two or more Inspectors of Election to serve at every meeting of the stockholders at which Directors are to be elected, which inspectors shall comply with Section 231 of the Delaware General Corporation Law.

2.7 Quorum; Voting Requirements; Adjourned Meetings. The holders of a majority of the outstanding shares of stock entitled to vote at any meeting, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of any business, except as otherwise provided by law, by the Certificate of Incorporation or by these Bylaws. In all matters other than the election of directors, the affirmative vote of a majority in amount of stock of such quorum shall be valid as a corporate act, except in those specific instances in which a larger vote is required by law or by the Certificate of Incorporation or by these Bylaws. Directors shall be elected by a plurality of the votes present in person or represented by proxy at a meeting at which a quorum is present and entitled to vote on the election of directors.

If the holders of a majority of the outstanding shares of stock entitled to vote are not present in person or represented by proxy, at a meeting of stockholders, the holders of a majority of the stock present in person or represented by proxy at such meeting shall have power successively to adjourn the meeting from time to time to another time, date and place. When a meeting is adjourned to another time, date and place, notice need not be given of the adjourned meeting if the time, date and place of such adjourned meeting are announced at the meeting at which such adjournment is taken. At such adjourned meeting at which a quorum is present in person or by proxy, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

2.8 Proxies. Each stockholder having the right to vote at a meeting of stockholders may personally vote or may authorize another person or persons to act for such stockholder by proxy appointed by an instrument in writing executed by such stockholder or by means of electronic transmission which sets forth or is submitted with information from which it can be determined that the transmission was authorized by the stockholder. No proxy shall be voted or acted upon after three (3) years from its date unless the proxy shall provide for a longer period.

2.9 Voting. Unless otherwise provided in the Certificate of Incorporation or resolutions adopted by the Board of Directors in accordance with the General Corporation Law of Delaware, each stockholder shall have one vote for each share of stock entitled to vote at such meeting registered in the name of such stockholder on the books of the Corporation. At all meetings of stockholders the voting shall be by ballot, including the election of directors. If authorized by the Board of Directors, any requirement for a written ballot shall be satisfied by a ballot submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder or proxy holder.

2.10 Stockholders’ Lists. The Secretary or an Assistant Secretary, who shall have charge of the stock ledger, shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number and class of shares registered in the name of each stockholder. The Corporation may, but shall not be required to, include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. The list shall be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present.

2.11 Stock Ledger. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required under Bylaw 2.10 or the books of the Corporation, or to vote in person or by proxy at any meeting of the stockholders.

2.12 Nomination of Directors and Presentation of Business at Stockholder Meetings.

(a) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of record entitled to vote at the meeting at the time of the giving of notice provided for in this Bylaw 2.12, who is entitled to vote thereon at the meeting and who complied with the notice procedures set forth in this Bylaw 2.12.

(b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to Bylaw 2.12(a)(iii), the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and the business that such stockholders proposes to bring before the meeting must be a proper matter for stockholder action under the Delaware General Corporation Law. To be timely, a stockholder’s notice for nominations and for all other business to be brought before the meeting must be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not less than one hundred twenty (120) days in advance of the date of the Corporation’s proxy statement released to stockholders in connection with the preceding year’s annual meeting; provided, however, that in the event that no annual meeting of stockholders was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year’s proxy statement, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of (i) the 120th day prior to such annual meeting or (ii) the 10th day following the date on which public announcement of the date of such meeting is first made. Such stockholder’s notice shall set forth as to each person whom the stockholder proposes to nominate for election or reelection as a director: (A) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (B) a representation that such stockholder is a holder of record of stock of the Corporation entitled to vote in the election of directors at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (C) the name and address of such stockholder, as it appears on the Corporation’s books, and of the beneficial owner (as such term is defined in Section 4(d) of Article IX of the Corporation’s Certificate of Incorporation), if any, on whose behalf the nomination is made; (D) the class and number of shares of the Corporation’s capital stock that are owned beneficially (with such term having a meaning correlative with that of beneficial owner in Section 4(d) of Article IX of the Corporation’s Certificate of Incorporation) and of record by the nominating stockholder and each nominee proposed by such stockholder; (E) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (F) such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to Regulation 14A (17 C.F.R. § 240.14a-1 et seq.) as then in effect under the Securities Exchange Act of 1934, as amended (“Exchange Act”), had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (G) the consent of each nominee to serve as a director of the Corporation if so elected. As to any other business that the stockholder proposes to bring before the meeting, such stockholder’s notice to the Secretary shall set forth as to each matter: (I) a brief description of the business desired to be brought before the annual meeting; (II) a representation that such stockholder is a holder of record of stock entitled to vote on the business proposed by such stockholder and intends to appear in person or by proxy at the meeting to present the proposed business to be brought before the meeting; (III) the name and address of the stockholder proposing such business, as it appears on the Corporation’s books, and of the beneficial owner (as such term is defined in Section 4(d) of Article IX of the Corporation’s Certificate of Incorporation), if any, on whose behalf the business is proposed; (IV) the class and number of shares of the Corporation’s capital stock that are owned beneficially (with such term having a meaning correlative with that of beneficial owner in Section 4(d) of Article IX of the Corporation’s Certificate of Incorporation) and of record by the stockholder; (V)

the reason for conducting such business at the meeting and any material interest of the stockholder or such beneficial owner in such business; and (VI) all other information with respect to each such matter as would have been required to be included in a proxy statement filed pursuant to Regulation 14A (17 C.F.R. § 240.14a-1 et seq.) as then in effect under the Exchange Act, had proxies been solicited by the Board of Directors with respect thereto. Notwithstanding anything in this Bylaw 2.12(b) to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least one hundred forty (140) days in advance of the date of the Corporation’s proxy statement released to stockholders in connection with the preceding year’s annual meeting, a stockholder’s notice shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

(c) Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders with regard to which the Board of Directors has determined that directors are to be elected (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Board of Directors, or (iii) by any stockholder who is a stockholder of record at the time of the giving of notice provided for in this Bylaw 2.12, who is entitled to vote for the election of Directors at the meeting and who complies with the notice procedures set forth in the last sentence of this Bylaw 2.12(c). In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice setting forth the information required by Bylaw 2.12(b) shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which public announcement is first made of the date of the special meeting.

(d) Only such persons who are nominated in accordance with the procedures set forth in this Bylaw 2.12 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Bylaw 2.12. The chairman of the meeting of stockholders shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Bylaw 2.12 and, if any proposed nomination or business is not in compliance with this Bylaw 2.12, to declare that such defective nominations or proposal shall be disregarded.

(e) For purposes of this Bylaw 2.12, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(f) Notwithstanding the foregoing provisions of this Bylaw 2.12, (i) if any class of series of stock has the right, voting separately by class or series, to elect directors at an

annual or special meeting of stockholders, such directors shall be nominated and elected pursuant to the terms of such class of series of stock; and (ii) a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw 2.12. To the extent Bylaw 2.12 shall be deemed by the Board of Directors or the Securities and Exchange Commission, or adjudged by a court of competent jurisdiction, to be inconsistent with the rights of stockholders to request inclusion of a proposal in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act, such rule shall prevail.

ARTICLE III

BOARD OF DIRECTORS

3.1 Number. Unless and until changed by the Board of Directors as hereinafter provided, the number of directors to constitute the Board of Directors shall be the same as the number of directors provided for the first Board in the Certificate of Incorporation or, if not so provided, shall be the same as the number of directors elected by the incorporator or incorporators as the initial directors of the Corporation. The Board of Directors shall have the power to change the number of directors by resolution adopted by a majority of the whole Board (including by resolution of the whole Board providing for the issuance of one or more series of Preferred Stock granting the holders thereof with the right, voting by itself as a series or together with other series of Preferred Stock as a class, to elect one or more directors) unless that number of directors is established in the Certificate of Incorporation. If the number of directors is established in the Certificate of Incorporation, then the number may be changed only by amendment of the Certificate of Incorporation. The Board of Directors shall be divided into three classes, in accordance with the provisions of the Corporation’s Certificate of Incorporation. Unless otherwise provided for in the Certificate of Incorporation, directors need not be stockholders of the Corporation. As used in these Bylaws, the terms “whole Board” and “whole Board of Directors” mean the total number of directors which the Corporation would have if there were no vacancies.

3.2 Powers of the Board. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authorities by these Bylaws and the Certificate of Incorporation expressly conferred upon it, the Board of Directors may exercise all such powers of the Corporation, and do all such lawful acts and things, that are not by statute or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders.

3.3 Meetings of the Newly Elected Board. The first meeting of the members of each newly elected Board of Directors shall be held immediately following and at the same place as the meeting of stockholders, for the purpose of electing officers and for the consideration of any other business that may properly be brought before the meeting. No notice of the meeting to the directors shall be necessary to legally constitute the meeting, provided a quorum shall be present. If, however, a quorum shall not be present, the first meeting of the members of each newly elected Board of Directors shall be held at such time and place as shall be consented to in writing by a majority of the directors, provided that written or printed notice of such meeting shall be given to each of the other directors in the same manner as provided in

Bylaw 3.4(b) with respect to the giving of notice for special meetings of the Board except that it shall not be necessary to state the purpose of the meeting in such notice.

Every director of the Corporation, upon such director’s election, shall qualify by accepting the office of director, and such director’s attendance at, or written approval of the minutes of, any meeting of the Board subsequent to such election shall constitute such director’s acceptance of such office; or such director may execute such acceptance by a separate writing, which shall be placed in the minute book.

3.4 Notice of Meetings; Waiver of Notice.

(a) Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such times and places either within or without the State of Delaware as shall from time to time be fixed by resolution adopted by the whole Board of Directors. Any business may be transacted at a regular meeting.

(b) Special Meetings.

(i) Special meetings of the Board of Directors may be called at any time by the Chairman of the Board or the President, and shall be called by the Secretary on the written request of a majority of the directors in office. The place may be within or without the State of Delaware as designated in the notice.

(ii) Written notice of each special meeting of the Board of Directors, stating the place, date and hour of the meeting and the purpose or purposes thereof, shall be mailed to each director at least three (3) days before the day on which the meeting is to be held, or shall be sent to the director by telegram, or delivered to the director personally, at least two (2) days before the day on which the meeting is to be held. If mailed, such notice shall be deemed to be delivered when it is deposited in the United States mail with postage thereon addressed to the director at the director’s residence or usual place of business. If given by telegraph, such notice shall be deemed to be delivered when it is delivered to the telegraph company. The notice may be given by any person having authority to call the meeting.

(iii) “Notice” and “call” with respect to such meetings shall be deemed to be synonymous.

(c) Waiver of Notice. Whenever any notice is required to be given to any director under any law, the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the director entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance by a director at a meeting shall constitute a waiver of notice of such meeting, except when the director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because it was not lawfully called or convened. Neither the business to be transacted at, nor the purposes of, any regular or special meeting of the directors or members of a committee of directors need be specified in any waiver of notice unless so required by the Certificate of Incorporation or these Bylaws. Any meeting of the Board of Directors shall be a legal meeting without any notice thereof having been given if all directors shall be present.

3.5 Meetings by Conference Telephone or Similar Communications Equipment. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors of the Corporation, or any committee designated by the Board, may participate in a meeting of the Board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by that means shall constitute presence in person at such meeting.

3.6 Action Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or of such committee, as the case may be, consent thereto in writing or by electronic transmission and each such writing or electronic transmission is filed with the minutes of proceedings of the Board or of such committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

3.7 Quorum; Voting Requirements.

(a) Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, a majority of the whole Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors.

(b) If at least one-third of the total number of directors is present at any meeting at which a quorum is not present, a majority of the directors present at such meeting shall have power successively to adjourn the meeting from time to time to a subsequent date, without notice to any director other than announcement at the meeting at which the adjournment is taken. At such subsequent session of the adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the original meeting which was adjourned. If the adjournment is for more than thirty (30) days, a notice of the subsequent session of the adjourned meeting shall be given each director.

3.8 Vacancies and Newly Created Directorships. Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class (specifically excluding directorships created pursuant to Section 2 of Article Four of the Certificate of Incorporation with respect to shares of any series of Preferred Stock for which the holders of such shares have the exclusive election rights, and any vacancies in such directorships) may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, unless it is otherwise provided in the Certificate of Incorporation or these Bylaws, and any director so chosen shall hold office until such director’s successor is duly elected and qualified, or until such director’s earlier resignation or removal. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If there are no directors

in office, then an election of directors may be held in the manner provided by statute. No decrease in the number of directors shall shorten the term of any incumbent director.

3.9 Committees.

(a) The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees consisting of one or more directors of the Corporation and serving at the pleasure of the Board, with each such committee having such lawfully delegable powers and duties as the Board thereby confers. Among other committees designated by the Board, the Corporation shall have an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, and may have an Executive Committee and one or more other committees.

(i) Audit Committee. The purpose of the Audit Committee is to assist the Board of Directors in overseeing the integrity of the Corporation’s financial statements and financial reporting processes, external auditor’s engagement, independence and performance, internal audit, accounting, and control functions with regards to financial reporting and compliance by the Corporation with legal and regulatory requirements. The Audit Committee shall have such responsibilities as are set forth in a charter approved by the Board of Directors. The Audit Committee shall be comprised of three or more directors, each of whom is independent of the management of the Corporation and are free from any relationship that, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment as a member of the committee. Each member of the committee shall hold office until his successor has been duly elected, or until his resignation or removal from the Audit Committee by the Board of Directors, or until he otherwise ceases to be a director. Any member of the Audit Committee may be removed from the committee by resolution adopted by a majority of the whole Board of Directors. Vacancies in the committee may be filled by the Board of Directors at any meeting thereof.

(ii) Compensation Committee. The purpose of the Compensation Committee is to review and approve the Corporation’s compensation and benefit programs, ensure the competitiveness of these programs, and advise the Board of Directors on the development of and succession for senior executive officers. The Compensation Committee shall have such responsibilities as are set forth in a charter approved by the Board of Directors. The Compensation Committee shall be comprised of three or more directors, each of whom is independent of the management of the Corporation and are free from any relationship that, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment as a member of the committee. Each member of the committee shall hold office until his successor has been duly elected, or until his resignation or removal from the Compensation Committee by the Board of Directors, or until he otherwise ceases to be a director. Any member of the Compensation Committee may be removed from the committee by resolution adopted by a majority of the whole Board of Directors. Vacancies in the committee may be filled by the Board of Directors at any meeting thereof.

(iii) Nominating and Corporate Governance Committee. The purpose of the Nominating and Corporate Governance Committee is (A) to identify individuals qualified to become members of the Board of Directors, consistent with criteria approved by the Board and to recommend to the Board proposed nominees for Board membership and election at the next annual meeting of stockholders, (B) to recommend to the Board directors to serve on each standing committee of the Board, (C) to lead the Board in its annual review of the Board’s performance, (D) to develop and recommend to the Board a set of corporate governance guidelines, and (E) to take a leadership role in shaping the corporate governance of the Corporation. The Nominating and Corporate Governance Committee shall have such responsibilities as are set forth in a charter approved by the Board of Directors. The Nominating and Corporate Governance Committee shall be comprised of three or more directors, each of whom is independent of the management of the Corporation and are free from any relationship that, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment as a member of the committee. Each member of the committee shall hold office until his successor has been duly elected, or until his resignation or removal from the Nominating and Corporate Governance Committee by the Board of Directors, or until he otherwise ceases to be a director. Any member of the Nominating and Corporate Governance Committee may be removed from the committee by resolution adopted by a majority of the whole Board of Directors. Vacancies in the committee may be filled by the Board of Directors at any meeting thereof.

(iv) Executive Committee. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate an Executive Committee of the Board, and may, by like action, abolish the same at any time. If created, the Executive Committee shall be comprised of three (3) members who shall consist of the Chairman of the Board, Vice Chairman of the Board and, if appointed from among the members of the Board of Directors, the Treasurer, or if the Treasurer is not a member of the Board of Directors, then one additional member of the Board of Directors designated by the Board of Directors to serve on the Executive Committee. The Executive Committee shall possess and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation; provided, however, the Executive Committee shall not possess and may not exercise the power of the Board of Directors to:

a. Declare or authorize any dividends or other distributions to stockholders;

b. Approve or propose the adoption or approval by stockholders of any matter required by applicable law to be adopted or approved by stockholders;

c. Fill any vacancy on the Board of Directors or on any of its committees;

d. Adopt, amend or repeal any provision of the Certificate of Incorporation;

e. Adopt, amend or repeal any provision of these Bylaws;

f. Adopt or approve a plan of merger not requiring stockholder approval;

g. Authorize or approve the reacquisition by the Corporation of any shares of its capital stock, except pursuant to a formula or method prescribed by the Board of Directors; or

h. Authorize or approve the issuance or sale, or any contract for the issuance or sale, of any shares of the Corporation’s capital stock, or the designation and relative rights, preferences and limitations of any class or series of capital stock, except as may be done within limits specifically prescribed by the Board of Directors.

(v) Other Committees. The Board of Directors may from time to time create and appoint other committees with one or more members as it deems desirable. Each additional committee shall bear the designation, have the powers and perform any duties, which are not inconsistent with the Certificate of Incorporation or these Bylaws or with law, as may be assigned to it by the Board of Directors.

(b) The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Unless otherwise provided by the Certificate of Incorporation, these Bylaws or the charter or Board resolution designating a committee, in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

(c) Any committee, to the extent provided in the resolution of the Board of Directors designating such committee, in the applicable committee charter or in these Bylaws, shall have and may exercise all of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority of the Board of Directors with respect to (i) amending the Corporation’s Certificate of Incorporation, (ii) approving or recommending to stockholders any type or form of Business Combination (as defined in Section 4(a) of Article IX of the Corporation’s Certificate of Incorporation), (iii) approving or recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, (iv) amending the Bylaws, (v) declaring a dividend or making any other distribution to the stockholders, (vi) authorizing the issuance of stock otherwise than pursuant to the grant or exercise of a stock option under employee stock options of the Corporation or in connection with a public offering of securities registered under the Securities Act of 1933, (vii) authorizing or approving any reacquisition of stock, except according to a formula or method prescribed by the Board of Directors, or (viii) appointing any member of any committee of the Board of Directors, or filling any vacancy on the Board of Directors or on any committee of the Board of Directors, unless a resolution of the Board of Directors, the charter for such committee, these Bylaws or the Certificate of Incorporation expressly so provides.

(d) All committees so appointed shall, unless otherwise provided by the Board of Directors, keep regular minutes of the transactions at their meetings and shall cause them to be recorded in books kept for that purpose in the office of the Corporation and shall report the same to the Board of Directors at its next meeting. The Secretary or an Assistant Secretary of the Corporation may act as secretary of the committee if the committee so requests.

3.10 Compensation. Unless otherwise restricted by law, the Certificate of Incorporation or these Bylaws, the Board of Directors may, by resolution, fix the compensation to be paid directors for serving as directors of the Corporation and may, by resolution, fix a sum which shall be allowed and paid for attendance at each meeting of the Board of Directors and may provide for reimbursement of expenses incurred by directors in attending each meeting; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving regular compensation therefor. Members of standing or temporary committees may be allowed similar compensation for attending standing or temporary committee meetings.

3.11 Resignation and Removal. Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. Such resignation shall take effect at the time specified therein or shall take effect upon receipt thereof by the Corporation if no time is specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Directors may be removed only in the manner provided in the Corporation’s Certificate of Incorporation.

3.12 Reliance on Records. A director, or a member of any committee designated by the Board of Directors, shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors, or by any other person as to matters the director reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

ARTICLE IV

OFFICERS

4.1 Designations.

(a) The officers of the Corporation shall be a Chairman of the Board, a President, one or more Vice Presidents, a Secretary, a Treasurer, one or more Assistant Secretaries and one or more Assistant Treasurers. The Board of Directors shall elect a President and a Secretary at its first meeting after each annual meeting of the stockholders. The Board then, or from time to time, may also elect one or more of the other prescribed officers as it may deem advisable, but need not elect any officers other than a President and a Secretary. The Board may, if it desires, elect or appoint additional officers and may further identify or describe any one or more of the officers of the Corporation.

(b) Officers of the Corporation need not be members of the Board of Directors. Any two or more offices may be held by the same person.

(c) An officer shall be deemed qualified when entering upon the duties of the office to which such officer has been elected or appointed and furnishes any bond required by the Board of Directors; but the Board may also require such officer’s written acceptance and promise faithfully to discharge the duties of such office.

4.2 Term of Office. Each officer of the Corporation shall hold office at the pleasure of the Board of Directors or for such other period as the Board may specify at the time of such officer’s election or appointment, or until such officer’s death, resignation or removal by the Board, whichever first occurs. In any event, each officer of the Corporation who is not reelected or reappointed at the annual election of officers by the Board next succeeding such person’s election or appointment shall be deemed to have been removed by the Board, unless the Board provides otherwise at the time of such person’s election or appointment.

4.3 Other Agents. The Board of Directors from time to time may appoint such other agents for the Corporation as it shall deem necessary or advisable, each of whom shall serve at the pleasure of the Board or for such period as the Board may specify, and shall have such titles and such duties, powers, responsibilities and authorities as shall be determined from time to time by the Board or by an officer empowered by the Board to make such determinations.

4.4 Removal. Any officer or agent elected or appointed by the Board of Directors, and any employee, may be removed or discharged by the Board whenever in its judgment the best interests of the Corporation would be served thereby, but such removal or discharge shall be without prejudice to the contract rights, if any, of the person so removed or discharged.

4.5 Salaries and Compensation. Salaries and compensation of all elected officers of the Corporation shall be fixed, increased or decreased by the Board of Directors, but this power, except as to the salary or compensation of the Chairman of the Board and the President, may, unless prohibited by law, be delegated by the Board to the Chairman of the Board, the President or a committee. Salaries and compensation of all appointed officers, agents and employees of the Corporation may be fixed, increased or decreased by the Board of Directors, but until action is taken with respect thereto by the Board of Directors, the same may be fixed, increased or decreased by the President or such other officer or officers as may be empowered by the Board of Directors to do so.

4.6 Delegation of Authority to Hire, Discharge and Designate Duties. The Board of Directors from time to time may delegate to the Chairman of the Board, the President or other officer or executive employee of the Corporation, authority to hire and discharge and to fix and modify the duties and salary or other compensation of employees of the Corporation under the jurisdiction of such person, and the Board may delegate to such officer or executive employee similar authority with respect to obtaining and retaining for the Corporation the services of attorneys, accountants and other experts.

4.7 Chairman of the Board and Vice Chairman.

(a) If a Chairman of the Board is elected, such person shall preside at all meetings of the stockholders and directors at which the Chairman of the Board may be

present and shall have such other duties, powers, responsibilities and authorities as may be prescribed elsewhere in these Bylaws. The Board of Directors may delegate such other power, responsibility and authority and assign such additional duties to the Chairman of the Board, other than those conferred by law exclusively upon the President or other officer, as the Board may from time to time determine, and, to the extent permissible by law, the Board may designate the Chairman of the Board as the chief executive officer of the Corporation with all of the duties, powers, responsibilities and authorities otherwise conferred upon the President of the Corporation under Bylaw 4.8, or the Board may, from time to time, divide the duties, powers, responsibilities and authorities for the general control and management of the Corporation’s business and affairs between the Chairman of the Board and the President.

(b) In the absence or disability of the Chairman of the Board or in the event of the Chairman of the Board’s inability or refusal to act, the Vice Chairman of the Board may perform the duties and exercise the powers of the Chairman of the Board until the Board of Directors otherwise provides. The Vice Chairman of the Board shall perform such other duties and have such other power, responsibility and authority as the Board of Directors may from time to time prescribe.

4.8 President.

(a) Unless the Board of Directors otherwise provides, the President shall be the chief executive officer of the Corporation with such general executive duties, powers, responsibilities and authorities of supervision and management as are usually vested in the office of the chief executive officer of a corporation, and shall carry into effect all directions and resolutions of the Board. The President, in the absence of the Chairman of the Board or the Vice Chairman of the Board or if there is no Chairman of the Board or Vice Chairman of the Board, shall preside at all meetings of the stockholders and of the Board.

(b) The President may execute all bonds, notes, debentures, mortgages and other contracts requiring the seal of the Corporation for and in the name of the Corporation, may cause the corporate seal to be affixed thereto, and may execute all other instruments for and in the name of the Corporation.

(c) Unless the Board of Directors otherwise provides, the President, or any person designated in writing by the President, shall have full power and authority on behalf of the Corporation to (i) attend and to vote or take action at any meeting of the holders of securities of corporations in which the Corporation may hold securities, and at such meetings shall possess and may exercise any and all rights and powers incident to being a holder of such securities, and (ii) execute and deliver waivers of notice and proxies for and in the name of the Corporation with respect to any securities held by the Corporation.

(d) The President shall, unless the Board of Directors otherwise provides, be an ex officio member of all standing committees.

(e) The President shall have such other or further duties and authority as may be prescribed elsewhere in these Bylaws or from time to time by the Board of Directors.

(f) If a Chairman of the Board is elected and designated as the chief executive officer of the Corporation, as provided in Bylaw 4.7, the President shall perform such duties and have such power, responsibility and authority as may be specifically delegated to the President by the Board of Directors or are conferred by law exclusively upon the President, and in the absence or disability of the Chairman of the Board or in the event of the Chairman of the Board’s inability or refusal to act, the President shall perform the duties and exercise the powers of the Chairman of the Board.

4.9 Vice Presidents. In the absence or disability of the President or in the event of the President’s inability or refusal to act, any Vice President may perform the duties and exercise the powers of the President until the Board of Directors otherwise provides. Vice Presidents shall perform such other duties and have such other power, responsibility and authority as the Board may from time to time prescribe.

4.10 Secretary and Assistant Secretaries.

(a) The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders, shall prepare minutes of all proceedings at such meetings and shall preserve them in a minute book of the Corporation. The Secretary shall perform similar duties for each standing or temporary committee when requested by the Board or such committee.

(b) The Secretary shall see that all books, records, lists and information, or duplicates, required to be maintained in the State of Delaware, or elsewhere, are so maintained.

(c) The Secretary shall keep in safe custody the seal of the Corporation, and shall have authority to affix the seal to any instrument requiring a corporate seal and, when so affixed, may attest the seal by his or her signature. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature.

(d) The Secretary shall have the general duties, powers, responsibilities and authorities of a secretary of a corporation and shall perform such other duties and have such other power, responsibility and authority as may be prescribed elsewhere in these Bylaws or from time to time by the Board of Directors or the chief executive officer of the Corporation, under whose direct supervision the Secretary shall be.

(e) In the absence or disability of the Secretary or in the event of the Secretary’s inability or refusal to act, any Assistant Secretary may perform the duties and exercise the powers of the Secretary until the Board of Directors otherwise provides. Assistant Secretaries shall perform such other duties and have such other power, responsibility and authority as the Board of Directors may from time to time prescribe.

4.11 Treasurer and Assistant Treasurers.

(a) The Treasurer shall have supervision and custody, and responsibility for the safekeeping, of the funds and securities of the Corporation, shall keep or

cause to be kept full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall keep, or cause to be kept, all other books of account and accounting records of the Corporation. The Treasurer shall deposit or cause to be deposited all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors or by any officer of the Corporation to whom such authority has been granted by the Board.

(b) The Treasurer shall disburse, or permit to be disbursed, the funds of the Corporation as may be ordered, or authorized generally, by the Board of Directors, and shall render to the chief executive officer of the Corporation and the directors whenever they may require, an account of all transactions effected by the Treasurer and of those under the Treasurer’s jurisdiction, and of the financial condition of the Corporation.

(c) The Treasurer shall have the general duties, powers, responsibilities and authorities of a treasurer of a corporation and shall, unless otherwise provided by the Board of Directors, be the chief financial and accounting officer of the Corporation. The Treasurer shall perform such other duties and shall have such other power, responsibility and authority as may be prescribed elsewhere in these Bylaws or from time to time by the Board.

(d) If required by the Board of Directors, the Treasurer shall give the Corporation a bond in a sum and with one or more sureties satisfactory to the Board for the faithful performance of the duties of that office and for the restoration to the Corporation, in the case of the Treasurer’s death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the possession or under control of the Treasurer which belong to the Corporation.

(e) In the absence or disability of the Treasurer or in the event of the Treasurer’s inability or refusal to act, any Assistant Treasurer may perform the duties and exercise the powers of the Treasurer until the Board of Directors otherwise provides. Assistant Treasurers shall perform such other duties and have other power, responsibility and authority as the Board of Directors may from time to time prescribe.

4.12 Duties of Officers May Be Delegated. If any officer of the Corporation be absent or unable to act, or for any other reason that the Board of Directors may deem sufficient, the Board may delegate, for the time being, some or all of the functions, duties, powers, responsibilities and authorities of any officer to any other officer, or to any other agent or employee of the Corporation or other responsible person, provided a majority of the total number of directors concurs.

ARTICLE V

LIABILITY AND INDEMNIFICATION

5.1 Limitation of Liability. No person shall be liable to the Corporation or its stockholders for any loss, damage, liability or expense suffered by the Corporation on account of any action taken or omitted to be taken by such person as a director or officer of the Corporation or of any Other Enterprise which such person serves or has served as a director or officer at the

Corporation’s request, if such person (a) acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or (b) took or omitted to take such action in reliance upon advice of counsel for the Corporation, or for such Other Enterprise, or upon statements made or information furnished by directors, officers, employees or agents of the Corporation, or of such Other Enterprise, which such person had no reasonable grounds to disbelieve.

5.2 Indemnification, Generally. In addition to and without limiting the rights to indemnification and advancement of expenses specifically provided for in the other Bylaws of this Article V, the Corporation shall indemnify and advance expenses to each person who is or was a director or officer of the Corporation or is or was serving at the Corporation’s request as a director or officer of any Other Enterprise to the full extent permitted by the laws of the State of Delaware as in effect on the date of the adoption of these Bylaws as may hereafter be amended.

5.3 Indemnification in Actions by Third Parties. The Corporation shall indemnify each person who has been or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or appellate (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of any Other Enterprise against all liabilities and expenses, including without limitation judgments, fines and amounts paid in settlement (provided that such settlement and all amounts paid in connection therewith are approved in advance by the Corporation using the procedures set forth in Bylaw 5.6, which approval shall not be unreasonably withheld or delayed), attorneys’ fees, ERISA excise taxes or penalties, fines and other expenses actually and reasonably incurred by such person in connection with such action, suit or proceeding (including without limitation the investigation, defense, settlement or appeal of such action, suit or proceeding) if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful; provided, however, that the Corporation shall not be required to indemnify or advance expenses to any such person or persons seeking indemnification or advancement of expenses in connection with an action, suit or proceeding initiated by such person including, without limitation, any cross-claim or counterclaim initiated by such person unless the initiation of such action, suit or proceeding was authorized by the Board of Directors of the Corporation. The termination of any such action, suit or proceeding by judgment, order, settlement, conviction or under a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, that such person had reasonable cause to believe that such person’s conduct was unlawful.

5.4 Indemnification in Derivative Actions. The Corporation shall indemnify each person who has been or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of any Other Enterprise against all expenses (including attorneys’ fees) actually and reasonably incurred

by such person in connection with the defense or settlement of such action, suit or proceeding (including without limitation the investigation, defense, settlement or appeal of such action, suit or proceeding) if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification under this Bylaw 5.4 shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which the action, suit or proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

5.5 Indemnification for Expenses. Notwithstanding the other provisions of this Article V, to the extent a person who is or was serving as a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of any Other Enterprise, has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Bylaws 5.3 and 5.4 (including the dismissal of any such action, suit or proceeding without prejudice), or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

5.6 Determination of Right to Indemnification. Prior to indemnifying a person pursuant to the provisions of Bylaws 5.2, 5.3 and 5.4, unless ordered by a court and except as otherwise provided by Bylaw 5.5, the Corporation shall determine that such person has met the specified standard of conduct entitling such person to indemnification as set forth under Bylaws 5.2, 5.3 and 5.4. Any determination that a person shall or shall not be indemnified under the provisions of Bylaws 5.2, 5.3 and 5.4 shall be made (a) by majority vote of the directors who were not parties to the action, suit or proceeding, even though less than a quorum, (b) by a committee of such disinterested directors designated by majority vote of such disinterested directors, even though less than a quorum, (c) if there are no such disinterested directors, or if such disinterested directors so direct, by independent legal counsel in a written opinion, or (d) by the stockholders, and such determination shall be final and binding upon the Corporation; provided, however, that in the event such determination is adverse to the person or persons to be indemnified hereunder, such person or persons shall have the right to maintain an action in any court of competent jurisdiction against the Corporation to determine whether or not such person has met the requisite standard of conduct and is entitled to such indemnification hereunder. If such court action is successful and the person or persons shall be determined to be entitled to such indemnification, such person or persons shall be reimbursed by the Corporation for all fees and expenses (including attorneys’ fees) actually and reasonably incurred in connection with any such action (including, without limitation, the investigation, defense, settlement or appeal of such action).

5.7 Advancement of Expenses. Expenses (including attorneys’ fees) actually and reasonably incurred by a person who may be entitled to indemnification hereunder in defending an action, suit or proceeding, whether civil, criminal, administrative, investigative or appellate, shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to indemnification by

the Corporation. Notwithstanding the foregoing, no advance shall be made by the Corporation if a determination is reasonably and promptly made (a) by majority vote of the directors who were not parties to the action, suit or proceeding for which the advancement is requested, even though less than a quorum, (b) by a committee of such disinterested directors designated by majority vote of such disinterested directors, even though less than a quorum, (c) if there are no such disinterested directors, or if such disinterested directors so directs, by independent legal counsel in a written opinion, or (d) by the stockholders, that, based upon the facts known to the Board, independent legal counsel or stockholders at the time such determination is made, such person acted in bad faith and in a manner that such person did not believe to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal proceeding, that such person believed or had reasonable cause to believe such person’s conduct was unlawful. In no event shall any advancement of expenses be made in instances where the Board, independent legal counsel or stockholders reasonably determines that such person intentionally breached such person’s duty to the Corporation or its stockholders.

5.8 Non-Exclusivity. The indemnification and advancement of expenses provided by this Article V shall not be exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, the Certificate of Incorporation, these Bylaws, any agreement, the vote of stockholders or disinterested directors, policy of insurance or otherwise, both as to action in their official capacity and as to action in another capacity while holding their respective offices, and shall not limit in any way any right which the Corporation may have to make additional indemnifications with respect to the same or different persons or classes of person. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article V shall, unless otherwise specifically provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors, administrators and estate of such a person.

5.9 Insurance. Upon resolution passed by the Board of Directors, the Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of any Other Enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article V.

5.10 Vesting of Rights. The rights granted by this Article V shall be vested in each person entitled to indemnification hereunder as a bargained-for, contractual condition of such person’s serving or having served as a director or officer of the Corporation or serving at the request of the Corporation as a director or officer of any Other Enterprise and while this Article V may be amended or repealed, no such amendment or repeal shall release, terminate or adversely affect the rights of such person under this Article V with respect to any act taken or the failure to take any act by such person prior to such amendment or repeal or with respect to any action, suit or proceeding with respect to such act or failure to act filed after such amendment or repeal.

5.11 Definitions. For the purposes of this Article V, references to:

(a) The “Corporation” shall, if and only if the Board of Directors shall determine, include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers or persons serving at the request of such constituent corporation as a director or officer of any Other Enterprise, so that any person who is or was a director or officer of such constituent corporation, or is or was serving at the request of such constituent corporation as a director or officer of any Other Enterprise, shall stand in the same position under the provisions of this Article V with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued;

(b) “Other Enterprise” or “Other Enterprises” shall include without limitation any other corporation, partnership, joint venture, trust or employee benefit plan;

(c) “director or officer of any Other Enterprise” shall include any person performing similar functions with respect to such Other Enterprise, whether incorporated or unincorporated;

(d) “fines” shall include any excise taxes assessed against a person with respect to an employee benefit plan;

(e) “defense” shall include investigations of any threatened, pending or completed action, suit or proceeding as well as appeals thereof and shall also include any defensive assertion of a cross-claim or counterclaim; and

(f) “serving at the request of the Corporation” shall include any service as a director or officer of a corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article V.

For purposes of this Article V, unless the Board of Directors of the Corporation shall determine otherwise, any director or officer of the Corporation who shall serve as a director or officer of any Other Enterprise of which the Corporation, directly or indirectly, is a stockholder or creditor, or in which the Corporation is in any way interested, shall be presumed to be serving as such director or officer at the request of the Corporation. In all other instances where any person shall serve as a director or officer of any Other Enterprise, if it is not otherwise established that such person is or was serving as such director or officer at the request of the Corporation, the Board of Directors of the Corporation shall determine whether such person is or was serving at the request of the Corporation, and it shall not be necessary to show any prior request for such service, which determination shall be final and binding on the Corporation and the person seeking indemnification.

5.12 Severability. If any provision of this Article V or the application of any such provision to any person or circumstance is held invalid, illegal or unenforceable for any reason whatsoever, the remaining provisions of this Article V and the application of such provision to other persons or circumstances shall not be affected thereby and, to the fullest extent possible, the court finding such provision invalid, illegal or unenforceable shall modify and construe the provision so as to render it valid and enforceable as against all persons or entities and to give the maximum possible protection to persons subject to indemnification hereby within the bounds of validity, legality and enforceability. Without limiting the generality of the foregoing, if any director or officer of the Corporation, or any person who is or was serving at the request of the Corporation as a director or officer of any Other Enterprise, is entitled under any provision of this Article V to indemnification by the Corporation for some or a portion of the judgments, amounts paid in settlement, attorneys’ fees, ERISA excise taxes or penalties, fines or other expenses actually and reasonably incurred by any such person in connection with any threatened, pending or completed action, suit or proceeding (including without limitation the investigation, defense, settlement or appeal of such action, suit or proceeding), whether civil, criminal, administrative, investigative or appellate, but not, however, for all of the total amount thereof, the Corporation shall nevertheless indemnify such person for the portion thereof to which such person is entitled.

ARTICLE VI

STOCK

6.1 Certificates for Shares of Stock. The shares of stock of the Corporation shall be represented by certificates unless the Board of Directors shall by resolution provide that some or all of any class or series of stock shall be uncertificated shares. Any such resolution shall not apply to shares of stock represented by a certificate until the certificate is surrendered to the Corporation. Certificates representing shares of stock shall be issued in numerical order, and each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the Chairman or Vice Chairman of the Board or the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying the number of shares owned by such stockholder. Any of or all the signatures on such certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar who signed such certificate, or whose facsimile signature shall have been used thereon, were such officer, transfer agent or registrar of the Corporation at the date of issue.

6.2 Transfers of Stock. Transfers of stock shall be subject to the restrictions on transfer, if any, set forth in the Certificate of Incorporation. Transfers of stock shall be made only upon the stock transfer books of the Corporation, kept at the office of the Corporation or of the transfer agent designated to transfer the class of stock, and before a new certificate is issued with respect to a previously issued certificate, the old certificate shall be surrendered for cancellation, subject to the provisions of Bylaw 6.6. Until and unless the Board of Directors appoints some other person, firm or corporation as its transfer agent (and upon the revocation of any such appointment, thereafter until a new appointment is similarly made), the Secretary of the Corporation shall be the transfer agent of the Corporation without the necessity of any formal

action of the Board, and the Secretary, or any person designated by the Secretary, shall perform all of the duties of such transfer agent.

6.3 Registered Stockholders. Only stockholders whose names are registered in the stock ledger shall be entitled to be treated by the Corporation as the holders and owners in fact of the shares standing in their respective names, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of Delaware.

6.4 Record Date.

(a) Stockholders’ Meetings. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

(b) Dividends and Other Distributions. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

6.5 Regulations. The Board of Directors shall have power and authority to make all such rules and regulations as it may deem expedient concerning the issue, transfer, conversion and registration of shares of stock of the Corporation (including any certificates representing such shares), not inconsistent with the laws of the State of Delaware, the Certificate of Incorporation and these Bylaws.

6.6 Lost Certificates. The Board of Directors may direct that a new certificate or certificates be issued in place of any certificate or certificates theretofore issued by the Corporation, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate or certificates to be lost, stolen or destroyed. When authorizing the issue of such replacement certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such

allegedly lost, stolen or destroyed certificate or certificates, or such owner’s legal representative, to give the Corporation a bond in such sum as it may direct to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or certificates.

ARTICLE VII

CORPORATE FINANCE

7.1 Dividends. Dividends on the outstanding shares of stock of the Corporation, subject to the provisions of the Certificate of Incorporation and of any applicable law and of these Bylaws, may be declared by the Board of Directors at any meeting. Subject to such provisions, dividends may be paid in cash, in property or in shares of stock of the Corporation. A member of the Board of Directors, or a member of any committee designated by the Board of Directors, shall be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors, or by any other person as to matters the director reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation, as to the value and amount of the assets, liabilities and/or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid, or with which the Corporation’s stock might properly be purchased or redeemed.

7.2 Creation of Reserves. The Board of Directors may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

ARTICLE VIII

GENERAL PROVISIONS

8.1 Fiscal Year. The Board of Directors shall have power to fix and from time to time change the fiscal year of the Corporation. In the absence of action by the Board of Directors, the fiscal year of the Corporation shall end each year on the date which the Corporation treated as the close of its first fiscal year, until such time, if any, as the fiscal year shall be changed by the Board of Directors.

8.2 Corporate Seal; Facsimile Signatures. If the Board of Directors adopts a corporate seal for the Corporation, such corporate seal shall have inscribed thereon the name of the Corporation and the words “Corporate Seal — Delaware.” The corporate seal may be used by causing it, or a facsimile thereof, to be impressed or affixed or in any manner reproduced. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

8.3 Depositories. The moneys of the Corporation shall be deposited in the name of the Corporation in such bank or banks or other depositories as the Board of Directors shall designate, and shall be drawn out only by check or draft signed by persons designated by

resolution adopted by the Board of Directors. Notwithstanding the foregoing the Board of Directors may by resolution authorize an officer or officers of the Corporation to designate any bank or banks or other depositories in which moneys of the Corporation may be deposited, and to designate the persons who may sign checks or drafts on any particular account or accounts of the Corporation, whether created by direct designation of the Board of Directors or by an authorized officer or officers as aforesaid.

8.4 Contracts. The Board of Directors may authorize any officer or officers, or agent or agents, to enter into any contract or execute and deliver any instrument for, and in the name of, the Corporation, and such authority may be general or confined to specific instances.

8.5 Amendments. These Bylaws may be altered, amended or repealed, or new Bylaws may be adopted, in the manner provided in the Certificate of Incorporation.

ARTICLE IX

EMPLOYEE STOCK OWNERSHIP PLAN

9.1 Employee Stock Ownership Plan. The Corporation may have an Employee Stock Ownership Plan, but in no event shall it acquire or at any time hold more than 20% of the issued and outstanding shares of the Corporation’s common stock.

*    *    *

CERTIFICATE

The undersigned, being the sole incorporator of New FCStone, Inc., a Delaware corporation, hereby certifies that the foregoing Bylaws are the original Bylaws of such Corporation adopted by the undersigned, as the sole incorporator of such Corporation.

Dated: October 12, 2006

/s/ Craig L. Evans

Craig L. Evans

Incorporator

EX-10.14

Exhibit 10.14

UNSECURED REVOLVING OPERATING NOTE

AMENDED AND RESTATED

$36,750,000	Note Dated: May 19, 2006
Due Date: March 1, 2007, unless extended	Johnston, Iowa

This Amended and Restated Unsecured Revolving Operating Note replaces and amends a certain Unsecured Revolving Operating Note in the amount of $40,000,000, dated March 15, 2002, as governed by a Master Loan Agreement, dated February 15, 2001, as the same may be modified from time to time.

FOR VALUE RECEIVED, FC STONE, L.L.C., an Iowa corporation of West Des Moines, Iowa (the “Borrower”), promises to pay to the order of Deere Credit, Inc., a Delaware corporation (the “Lender”), at Lender’s office at such place as Lender may designate in writing, the principal sum of Thirty-Six Million Seven Hundred and Fifty Thousand and 00/100 Dollars ($36,750,000), together with interest as provided in this Note, all in lawful money of the United States of America. So long as no event of default has occurred and is continuing, the Borrower may receive advances at any time until the Due Date. All amounts, which are repaid, may be readvanced. The unpaid principal balance of this promissory note (“Note”) shall bear interest computed upon the basis of a year of 360 days for the actual number of days elapsed in a quarter, at a rate of interest (the “Effective Interest Rate”) which is equal to 35/100 of 1% (0.35%) under the Prime rate or base rate of interest established by Citibank, N.A. of New York, New York (“Citibank”) as its base rate (the “Index”), as such Index may vary from time to time. Borrower understands that the Effective Interest Rate payable to Lender under this Note shall be determined by reference to the Index, and not by reference to the actual rate of interest charged by Citibank to any particular borrower(s). If the Index shall be increased or decreased, the Effective Interest Rate under this Note shall be increased or decreased by the same amount, effective the first day of the month following the date of the change in the Index.

If neither Borrower nor Lender has notified the other party of its intention to terminate this Note by February 1 of any year, the Note shall be automatically extended for another one year term.

The purpose of this loan is to fund margin accounts.

This note shall be unsecured.

Payments shall be paid to Lender as follows:

1. Borrower shall make quarterly payments of interest only on each March 31, June 30, September 30 and December 31 during the term of the Note;

2. On the Due Date all remaining outstanding amounts of principal, interest and late charges shall be due and payable.

In consideration of the loan commitment, the Borrower agrees to pay to the Lender a commitment fee on the average daily unused portion of the loan commitment at the rate of .15% (15 basis points) per annum (calculated on a 360-day basis), payable quarterly in arrears by the 20^th day

following each calendar quarter. Such fee shall be payable for each quarter (or portion thereof) occurring during the original or any extended term of the loan commitment.

Borrower expressly assumes all risks of loss or delay in the delivery of any payments made by mail and no course of conduct or dealing shall affect Borrower’s assumption of these risks. The Note may be prepaid, in full or in part at any time without penalty. All payments shall be applied first to late charges, then to interest and finally to principal.

Upon the occurrence of any event of default, as described in the Master Loan Agreement, dated as of February 15, 2001, between Lender and Borrower, as the same may be modified from time to time (the “Master Loan Agreement”, the Lender may exercise any of its remedies described in the Master Loan Agreement or the unpaid principal balance of this Note shall bear interest at a rate which is two percent (2%) greater than the Effective Interest Rate otherwise applicable. This Note shall be deemed to be “Note” within the meaning of Section 2 of the Master Loan Agreement. If any payment under this Note is not paid within ten (10) days after the date due, then, at the option of the Lender, a late charge of not more than five cents ($0.05) for each dollar of the installment past due may be charged by Lender.

Acceptance by Lender of any payment in any amount less than the amount then due shall be deemed an acceptance on account only, and Borrower’s failure to pay the entire amount due shall be and continue to be an event of default. The liability of the Borrower under this Note shall be absolute and unconditional, without regard to the liability of any other party. The laws of the State of Iowa hereunder shall govern all rights and obligations.

Borrower Address:	BORROWER FC STONE, L.L.C.
2829 Westown Parkway	By:	/s/ Robert V. Johnson
Suite 200	Its:	Exec. V. P. & CFO
West Des Moines, IA 30266
	Tax ID No. 42-1091210

Lender Address:

6400 N.W. 86^th Street

P.O. Box 6650 – Dept. 142

Johnston, Iowa 50131-6650

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EX-10.22

Exhibit 10.22

SECOND AMENDMENT

TO

UNSECURED REVOLVING SUBORDINATED NOTE

THIS SECOND AMENDMENT to the Unsecured Revolving Subordinated Noted (the “Note”) is dated this 28^th day of February, 2005 (the “Amendment Agreement”) by and between Deere Credit, Inc. (Deere) and FC Stone L.L.C. (Borrower), an Iowa Limited Liability Corporation (“Borrower).

RECITALS

A. Whereas, Deere agreed to provide Borrower a loan of $5,000,000 and Borrower and Deere entered into a Revolving Subordinated Note (Note) in the amount of $5,000,000 dated as of November 21, 2002, evidencing said loan.

B. Whereas, Borrower requested an increase of $2,000,000 in the loan facility and Deere approved this request as provided for in the First Amendment to Unsecured Revolving Subordinated Note, dated November 3, 2003, that provided for an increase in the amount that Deere agreed to lend to Borrower from $5,000,000 to $7,000,000.

C. Borrower has requested that the Due Date of the Note be extended to December 1, 2006, and Deere has approved this request.

NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, including the mutual promises and agreements contained herein, the parties hereto hereby agree as follows:

1.    Definitions. Capitalized terms used herein without definition shall have the definition given to them in the Unsecured Revolving Subordinated Note, herein referenced above, or as defined by other transaction documents referenced therein, as may be amended, if so defined therein.

2.    Amendments to Unsecured Revolving Subordinated Note. The parties hereto agree that the Note shall be amended as follows:

2.1    The Due Date of the Note shall be December 1, 2006, unless extended

3.    Borrower’s Representations. Borrower hereby represents and warrants that, after giving effect to this Amendment Agreement and the transactions contemplated hereby, no Event of Default has occurred and is continuing under the Note or related Transaction Documents as defined by the Revolving Subordinated Agreement dated November 21, 2002.

4.    General Provisions.

4.1    The Note, except as expressly modified herein, shall continue in full force and effect and be binding upon the parties thereto.

4.2    The execution, delivery and effectiveness of this Amendment Agreement shall not operate as a waiver of any right, power or remedy Deere may have under any of the loan documents, nor constitute a waiver of any provision of any of the Transaction Documents, and the Note, as expressly modified hereby, and each of the other Transaction Documents, are hereby ratified and confirmed and shall continue in full force and effect and be binding upon the parties thereto. Any direct or indirect reference in the transaction documents to the “Unsecured Revolving Subordinated Note” shall be deemed to be a reference to the Unsecured Revolving Subordinated Note as amended by this Amendment Agreement.

5.    Governing Law. This Amendment Agreement shall be governed by and construed in accordance with the laws of the State of Iowa or by the laws of the State of Illinois/New York as such may so be judicially determined.

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to the Unsecured Revolving Subordinated Loan Note to be executed by their duly authorized officers as of the date shown above.

DEERE CREDIT, INC.		FC STONE L.L.C.
By:	/s/ Bert D. Johnson	By:	/s/ Robert V. Johnson
Print Name:	Bert D. Johnson	Print Name:	Robert V. Johnson
Title:	Portfolio Manager	Title:	Executive V.P. & CFO

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EX-10.60

Exhibit 10.60

AMENDED AND RESTATED

PROMISSORY NOTE

PROMISSORY NOTE (the “Note”) of the Borrower named below delivered to RZB FINANCE LLC (“RZB”) dated as of January 30, 2006. This Note amends and restates, in its entirety, that certain Promissory Note dated February 24, 2005.

1. SPECIAL TERMS

The following terms and provisions shall apply to this Note: definitions of terms in this or other sections of this Note expressed in the singular shall include the plural and vice versa.

Borrower: FC Stone Merchant Services, LLC

(A Limited Liability Company organized under the laws of Delaware.)

Principal Amount of this Note:

Eight Million Dollars

($8,000,000)

Margin:

Base Rate Margin:     0%

Eurodollar Margin     2.50%

Available Interest Periods for Eurodollar Loans:

Up to 180 days

Loan Documents:    Line Letter dated February 17, 2004, between the Borrower and RZB as amended February 24, 2005, General Security Agreement dated February 17, 2004, between the Borrower and RZB, Continuing Agreement for Letters of Credit dated February 17, 2004, between the Borrower and RZB, and all other agreements from time to time executed by the Borrower for the benefit of RZB, in each case as amended, modified or supplemented from time to time.

Minimum Eurodollar Loan Amount: Not applicable

Maximum Base Rate Loan Amount: Not applicable

Minimum Repayment Amount: Not applicable

2. PRINCIPAL

FOR VALUE RECEIVED, the Borrower promises to pay to the order of RZB, ON DEMAND, the Principal Amount of this Note specified in Section 1 or, if less, the then-outstanding principal amount of all loans (each a “Loan” and collectively, the “Loans”) made to the Borrower by RZB pursuant to the Loan Documents. In no event shall the maturity date of any Loan be more than 180 days after the date such Loan is made.

Each Loan shall initially be designated as a “Base Rate Loan” unless not later than 11:00 a.m. (New York time) three Business Days prior to the making of such Loan the Borrower shall have given written notice to RZB that such Loan (or a portion thereof) shall initially be designated as a “Eurodollar Loan” and setting forth the Interest Period therefor. The Borrower may also from time to time redesignate all or a portion of any Base Rate Loan as a Eurodollar Loan or any Eurodollar Loan as a Base Rate Loan by giving RZB written notice of such redesignation not later than 11:00 a.m. (New York time) three Business Days prior to such redesignation, provided that a Eurodollar Loan may be redesignated as a Base Rate Loan only on the last day of an Interest Period applicable thereto. Each notice of initial designation and redesignation shall be irrevocable. Notwithstanding the foregoing, no Loan (or portion thereof) shall be initially designated as a Eurodollar Loan, and no Base Rate Loan (or portion thereof) shall be redesignated as a Eurodollar Loan (i) if such Eurodollar Loan would be in an amount less than the Minimum Eurodollar Amount specified in Section 1 or (ii) if, as a result thereof, there shall be in effect at such time more than three separate Interest Periods.

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The Borrower agrees that, if it shall fail to repay the Loans at maturity (whether on demand, by acceleration or otherwise) and all or a portion of the Loans at such maturity are being maintained as Eurodollar Loans, RZB, without limiting its rights hereunder, may at any time on or after such maturity redesignate all or any such Eurodollar Loans as a Base Rate Loan. Upon any such redesignation, RZB shall notify the Borrower thereof.

3. INTEREST

Base Rate Loans.    The Borrower promises to pay interest on the unpaid principal amount of each Base Rate Loan (after as well as before judgment) from the date of the making of, or the redesignation of a Eurodollar Loan as, such Base Rate Loan until maturity (whether on demand, by acceleration or otherwise), or redesignated as a Eurodollar Loan, at a rate per annum equal to the Base Rate Margin specified in Section 1 plus the Base Lending Rate from time to time in effect, such interest to be payable on the last Business Day of each calendar month and at such maturity.

Eurodollar Loans.    The Borrower promises to pay interest on the unpaid principal amount of each Eurodollar Loan (after as well as before judgment) from the date of the making of, or the redesignation of a Base Rate Loan (or portion thereof) as, such Eurodollar Loan until maturity (whether on demand, by acceleration or otherwise), or redesignated as a Base Rate Loan, at a rate per annum which, during each Interest Period applicable thereto, shall be equal to the Eurodollar Margin specified in Section 1 plus the Quoted Rate for such Interest Period. Such interest shall be payable on the last day of each Interest Period; provided that if any Interest Period in respect of a Eurodollar Loan is longer than three months, such interest prior to maturity shall be paid on the last Business Day of each three-month interval within such Interest Period as well as on the last day of such Interest Period.

Overdue Amounts.    Notwithstanding the immediately preceding two paragraphs, the Borrower shall also pay interest at a rate per annum which shall be the greater of (i) 2% plus the Base Rate Margin plus the Base Lending Rate from time to time in effect, or (ii) 2% in excess of the rate which would otherwise be applicable pursuant to the terms hereof, on any principal of the Loan and, to the extent permitted by law, on any interest or other amount payable by the Borrower hereunder which shall not be paid in full when due (whether on demand, by acceleration or otherwise) from such due date until paid in full (after as well as before judgment), such interest to be payable on demand.

Calculations.    All interest shall be computed on the basis of the number of days actually elapsed in a 360-day year.

Definitions.

The term “Interest Period,” when used with respect to a Eurodollar Loan, means (i) initially, the period commencing on the date of such Eurodollar Loan, and (ii) thereafter, each of the successive periods occurring while such Eurodollar Loan is outstanding, with such successive periods commencing on the same day as the last day of the immediately preceding period. The duration of an Interest Period commencing prior to maturity (by demand, acceleration or otherwise) shall be:

3.a. one of the periods specified as Available Interest Periods for Eurodollar Loans in Section 1, as selected by the Borrower not later than 11:00 a.m. (New York time) three Business Days prior to the commence of such Interest Period, or

3.b. absent a timely selection by the Borrower, the shortest of the periods specified as Available Interest Periods for Eurodollar Loans in Section 1.

The duration of an Interest Period commencing on or after the due date for full payment hereunder (whether on demand, by acceleration or otherwise) shall be such period as RZB may reasonably select. Any Interest Period which would otherwise expire on a day other than a Business Day shall be (i) extended to the next following Business Day or (ii) if the next following Business Day is in a new calendar month, shortened to the next preceding Business Day.

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The term “Quoted Rate,” when used with respect to an Interest Period for a Eurodollar Loan, means the quotient of (i) the offered rate quoted by The Chase Manhattan Bank (the “Bank”) in the Interbank Eurodollar market in New York or London, England on or about 11:00 a.m. (New York or London time, as the case may be) two Business Days prior to such Interest Period for U.S. dollar deposits of an amount comparable to the principal balance of such Eurodollar Loan and for a period comparable to such Interest Period, divided by (ii) one minus the Reserve Percentage. For purpose of this definition, (a) ”Reserve Percentage” shall mean with respect to any Interest Period, the percentage which is in effect on the first day of such Interest Period under Regulation D as the maximum reserve requirements for member banks of the Federal Reserve System in New York City with deposits comparable in amount to those of the Bank against Eurocurrency Liabilities. The Quoted Rate for the applicable period shall be adjusted automatically on and as of the effective date of any change in the applicable Reserve Percentage; (b) ”Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System, as it may be amended from time to time; and (c) ”Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D, as in effect from time to time.

The term “Business Day” means any day on which banks are open for dealings by and between banks in U.S. dollar deposits in the interbank Eurodollar market in New York City and London, England, other than a Saturday, Sunday, or any day which shall be in London, England or New York City a legal holiday or a day on which banking institutions are authorized by law to close.

The term “Base Lending Rate” means, for any day, the higher of (i) the rate announced by the Bank from time to time at its principal office in New York, New York as its prime rate for domestic (United States) commercial loans in effect on such day and (ii) the Federal Funds Rate in effect on such day plus  ¹/2%. (Such Base Lending Rate is not necessarily intended to be the lowest rate of interest charged by the Bank in connection with extensions of credit.) Each change in the Base Lending Rate shall result in a corresponding change in the interest rate and such change shall be effective on the effective date of such change in the Base Lending Rate.

The term “Federal Funds Rate” means, for any day, the overnight federal funds rate in New York City, as published for such day (or, if such day is not a New York Business Day, for the next preceding New York Business Day) in the Federal Reserve Statistical Release H.15 (519) or any successor publication, or if such rate is not so published for any day which is a New York Business Day, the average of the quotations for such day on overnight federal funds transactions in New York City received by the Bank from three federal funds brokers of recognized standing selected by the Bank.

4. ADDITIONAL PAYMENTS

If any event shall occur (whether in the form of reserve requirements not included in the computation of the Quoted Rate, exchange control regulations, governmental charges or changes in the interbank Eurodollar market or the position of any financial institution that provides financing to RZB (a “funding source”) in such market or otherwise) which shall result in RZB or such funding source not receiving interest with respect to any Eurodollar Loan at the effective rate of the Eurodollar Margin (plus 2% after demand) in excess of the costs incurred by RZB or such funding source in making, funding or maintaining such Eurodollar Loan, then the Borrower shall pay to RZB, upon demand, such additional amounts as may be necessary to compensate RZB or such funding source, as the case may be, for any such deficiency or reduction. Each demand for compensation pursuant to the preceding sentence shall be accompanied by a certificate of RZB in reasonable detail setting forth the computation of such compensation (including the reason therefor), which certificate shall be conclusive, absent manifest error.

5. PREPAYMENTS

The Borrower agrees that it shall have no right to repay all or any portion of a Eurodollar Loan except on the last day of an Interest Period applicable to such Eurodollar Loan, and then only if RZB has received written

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notice of such repayment not later than 11:00 a.m. (New York time) three Business Days prior to such repayment; any such notice shall be irrevocable. The Borrower will have the right to repay all or any portion of a Base Rate Loan only if RZB has been notified prior to 10:00 a.m. (New York time) on the day of any repayment. All partial repayments shall be made in an amount not less than the Minimum Repayment Amount. All repayments shall be in an amount not less than the Minimum Repayment Amount. All repayments pursuant to this paragraph shall be accompanied by the payment of all accrued interest on the principal amount so paid.

Without limiting the foregoing, the Borrower agrees that if for any reason any Eurodollar Loan (or any portion thereof) is not made after RZB or its funding source has arranged funding therefor, or, if for any reason (including as a result of demand) any Eurodollar Loan is repaid on a day other than the last day of an Interest Period therefor, the Borrower shall pay to RZB, upon demand, any unrecovered expenses or losses (including losses resulting from the re-employment of funds) incurred by RZB or its funding source as the result of such failure to borrow or repayment. RZB’s determination as to additional amounts due under this paragraph shall be conclusive, absent manifest error.

6. ALL PAYMENTS

Each payment by the Borrower pursuant to this Note shall be made prior to 1:00 p.m. (New York time) on the date due and shall be made without set-off or counterclaim to RZB at such account as RZB shall designate, or in the absence of such designation to RZB at its office, presently located at 1133 Avenue of the Americas, New York, NY 10036, or as RZB may otherwise direct and in such amounts as may be necessary in order that all such payments (after withholding for or on account of any present or future taxes, levies, imposts, duties or other similar charges of whatsoever nature imposed by any government or any political subdivision or taxing authority thereof, other than any tax on or measured by the net income of RZB pursuant to the income tax laws of the jurisdiction where RZB’s principal or lending office is located) shall not be less than the amounts otherwise specified to be paid under this Note. Each such payment shall be made in lawful currency of the United States of America and in immediately available funds. If the stated due date of any payment required hereunder is other than a Business Day, such payment shall be made on the next succeeding Business Day and interest at the applicable rate shall accrue thereon during such extension.

7. REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants that all acts, filings, conditions and things required to be done and performed and to have happened (including, without limitation, the obtaining of necessary governmental approvals) precedent to the issuance of this Note to constitute this Note the duly authorized, legal, valid and binding obligation of the Borrower, enforceable in accordance with its items, have been done, performed and have happened in due and strict compliance with all applicable laws.

8. DEFAULT

Without limiting the right of RZB to demand payment of the Loans evidenced hereby at any time in its sole discretion, if any of the following events shall occur: default in payment of any amount due hereunder to the holder hereof, whether on demand or otherwise; suspension or liquidation by the Borrower of its usual business or suspension or expulsion of the Borrower from any exchange; calling of a meeting of creditors; assignment by the Borrower for the benefit of creditors; dissolution, bulk sale or notice thereof effected or given by the Borrower; creation of a security interest in any assets of the Borrower which are or shall be subject to liens granted to the holder hereof by the Borrower without consent of the holder hereof; insolvency of any kind, attachment, distraint, garnishment, levy, execution, judgment, application for or appointment of a receiver or custodian, filing of a voluntary or involuntary petition under any provision of the U.S. Bankruptcy Code or amendments thereto, of, by or against the Borrower or any property or rights of the Borrower; filing of a petition or institution of any proceeding by or against the Borrower for any relief under any

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bankruptcy or insolvency laws or any laws relating to the relief of debtors, readjustment of indebtedness, reorganizations, compositions or extensions; any governmental authority or any court at the instance of any governmental authority shall take possession of any substantial part of the property of the Borrower or shall assume control over the affairs or operations of the Borrower; any statement, representation or warranty made by the Borrower in any document, agreement or financial statement delivered to RZB shall prove to be false in any material respect when made; failure of the Borrower or any other party thereto to comply with any term of any of the Loan Documents; failure of the Borrower, on request, to furnish to RZB any financial information, or to permit inspection by RZB of any books or records; any change in, or discovery with regard to, the condition or affairs of the Borrower which, in RZB’s opinion, increases its credit risk, or if RZB for any other reason deems itself insecure; then, the indebtedness evidenced by this Note, and all accrued interest thereon shall become absolute, due and payable without demand or notice to the Borrower. Upon default in the due payment of this Note, or whenever the same or any installment of principal or interest hereof shall become due in accordance with any of the provisions hereof (whether on demand or otherwise), RZB may, but shall not be required to, exercise any or all of its rights and remedies, whether existing by contract, law or otherwise, with respect to any collateral security delivered in respect of the indebtedness evidenced hereby.

9. MISCELLANEOUS

This Note is delivered pursuant to, and entitled to the benefits of, the Loan Documents.

The Loans and principal repayments thereof, all designations of a Loan (or any portion thereof) as a Base Rate Loan or a Eurodollar Loan, and the interest rate and Interest Period applicable to each Eurodollar Loan may be recorded on the records of RZB and, prior to any transfer of, or any action to collect, this Note, the outstanding principal amount of each Loan shall be endorsed on this Note, together with the date of such endorsement. Any such recordation or endorsement shall constitute prima facie evidence of the accuracy of the information so recorded or endorsed (provided, however, that the failure of RZB to record any of the foregoing shall not limit or otherwise affect the obligation of the Borrower to repay all the Loans (including interest thereon) and its other obligations hereunder and under the Loan Documents). The Bank may charge any account of the Borrower with the Bank for amounts payable under this Note.

Each payment of principal of, or interest on, the Loans shall constitute an acknowledgement of the indebtedness of the Borrower under the Loan Documents and this Note. The Borrower:

a. waives presentment, demand, protest and other notice of any kind in connection with this Note, and

b. agrees to pay to the holder hereof, on demand, all costs and expenses (including reasonable legal fees) incurred in connection with the enforcement and collection of this Note.

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW), BUT THIS SHALL NOT LIMIT THE RATE OF INTEREST WHICH MAY BE CHARGED BY RZB UNDER OTHER APPLICABLE LAW.

The Borrower hereby agrees that ANY LEGAL ACTION OR PROCEEDING AGAINST THE BORROWER WITH RESPECT TO THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE CITY OF NEW YORK OR OF THE UNITES STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK as RZB may elect, and by execution and delivery hereof, the Borrower accepts and consents to, for itself and in respect to its property, generally and unconditionally, the jurisdiction of the aforesaid courts and agrees that such jurisdiction shall be exclusive, unless waived by RZB in writing, with respect to any action or proceeding brought by it against RZB and any questions relating to usury. Nothing herein shall limit the right of RZB to bring

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proceedings against the Borrower in the courts of any other jurisdiction. Service of process out of any such courts may be made by mailing copies thereof by registered or certified mail, postage prepaid, to the Borrower at its address for notices as specified herein and will become effective 30 days after such mailing. The Borrower agrees that Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York shall apply to this Note and, to the maximum extent permitted by law, waives any right to stay or to dismiss any action or proceeding brought before said courts on the basis of forum non conveniens.

AFTER REVIEW THIS PROVISION SPECIFICALLY WITH ITS RESPECTIVE COUNSEL, EACH OF THE BORROWER AND RZB HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE BORROWER OR RZB. THIS PROVISION IS A MATERIAL INDUCEMENT FOR RZB MAKING THE LOANS TO THE BORROWER.

Nothing contained in this Note shall be deemed to establish or require the payment of a rate of interest in excess of the maximum rate permitted by applicable law (the “Maximum Rate”). If the amount of interest payment for any interest payment period ending on any interest payment date calculated in accordance with the provisions of this Note (said amount, the “Calculated Interest”) exceeds the amount of interest that would be payable for such interest payment period had interest for such interest payment period been calculated at the Maximum Rate, there shall be paid on such interest payment date an amount of interest calculated on the basis of the Maximum Rate for such interest payment period. If on any subsequent interest payment date (i) the Calculated Interest for the interest payment period ending on such subsequent interest payment date (the “Current Interest Period”) is less than the amount of interest that would be payable for such Current Interest Period had interest for such Current Interest Period been calculated on the basis of the Maximum Rate and (ii) any portion of the excess (if any) of Calculated Interest for any prior interest payment period over interest calculated at the Maximum Rate for such prior interest payment period (the “Outstanding Interest Amount”) remains unpaid, then on such subsequent interest payment date there shall be paid, as provided herein, additional interest for such Current Interest Period in an amount equal to the lesser of (i) the theretofore unpaid Outstanding Interest Amounts for all prior interest periods or (ii) an amount that, when added to the amount of Calculated Interest payable for such Current Interest Period, results in the payment of interest for such Current Interest Period at the Maximum Rate.

IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed and delivered by its duly authorized officer(s).

FC Stone Merchant Services, LLC
By:	/s/ Allan J. Lee
Name:	Allan J. Lee
Title:	President

Address of Borrower for Notices:

396 Springfield Avenue

Summit, NJ 07901

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EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

FCStone Group, Inc.:

We consent to the use of our report dated November 18, 2005, except for note 2, as to which the date is May 25, 2006, with respect to the consolidated statements of financial position of FCStone Group, Inc. as of August 31, 2005 and 2004, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended August 31, 2005, and all related financial statement schedules, which report is included herein, and to the reference to our firm under the heading “Experts” in the prospectus.

As described in note 2 to the consolidated financial statements, the consolidated financial statements, and the related financial statement schedules as of and for the year ended August 31, 2005, have been restated.

/s/ KPMG LLP

Des Moines, Iowa

October 12, 2006